According to the National Association of Realtors, US pending home sales rose 5.2% in July compared to June. The statistics refer to contracts signed during July. Usually such contracts take 1-2 months to become closed deals.
"We should be seeing more sales with financing so cheap," Larson said.
Some experts do not think that the rise is very impressive but, nevertheless, the increase was a pleasant surprise. Michael D. Larson, an interest rate and housing analyst with Weiss Research, noted that only a slight increase occurred and mortgages rates are at their lowest point. Indeed, one would expect more sales with these low rates.
Low Rates – Few Takers
Since mortgage rates are the cheapest in decades, it is amazing that they cannot entice more people to buy a home. During the past week, the average rate for a 30-year fixed loan was 4.32 per cent. That rate was down from 4.36 percent the previous week and that number reflected the tenth time in 11 weeks that rates had fallen to such a low level.
Of course, many people cannot qualify for loans as there are vey strict guidelines in place. Obviously unemployment is affecting sales and some people need time to regain their confidence after the recent recession. Individuals who suffered setbacks during the economic downturn cannot be expected to bounce back at a moment's notice. In fact, it can sometimes take a decade or longer to recover lost equity.
Positive Sign – Cautious Optimism
Yet a 5.2% increase seems positive compared to the declines of the previous two months. US home sales fell almost 30% in May and another 2.8% in June. In addition, last week's rumour was that pending home sales had experienced a substantial drop in July. Of course, despite the rise in July, home sales in the coming months are not expected to go through the roof.
Industry experts expect that improvements will come at a slow and gradual pace. At present, home sales are at their lowest level in more than a decade. Keep in mind that the system is now minus some perks such as the Federal Homebuyers' Tax Credit.
In addition, the July 2010 figures are not as favorable as the statistics from the same period in 2009. It is true that the index rose to 79.4 from 75.5 in June. Yet the level in July 2009 was 98.1 – almost 20% more than the July 2010 index.
The impressive 2009 level was reached after government announced tax incentives. The index fell to 75 in April 2010 after the expiry of the Federal Homebuyers' Tax Credit. In 2001, the index reading was 100 and it increased every year for the next five years.
Obviously, it is easy to understand why some experts do not think that the July rise of 5.2% was an outstanding performance. Pending home sales improved in July 2010 but not to any significant extent. While buyers take their time, sellers wait for that final sale. Of course, real estate investors are encouraged by July's numbers.
Do You Think That US Home Sales Will Continue To Rise In Autumn 2010?