Pending Home Sales Increase In April as Buyers Rush to Beat Tax Credit Deadline

Dennis Norman

Today the National Association of REALTORS released it’s Pending Home Sales Index for April showing an increase of 6.0 percent in the index from March (seasonally adjusted) and a whopping 22.4 percent increase from April 2009. This comes on the heels of a 5.3 percent increase in March and an 8.3 percent increase in February. If these were pure “market-driven” sales this would be extremely exciting news and point toward a recovery in the real estate market. Unfortunately, everything I see points to this being driven primarily, if not purely, by the April 30th deadline to enter into a contract to purchase a home to receive the home-buyer tax credit.

Here are highlights from the report:

• April”s pending home sales index (seasonally adjusted) was 110.9 (the index is based upon 100.0 being equal to the average level of sales activity in 2001 which we could call the last “normal” year) which was a 6.0 percent increase in the index from March and an increase of 22.4 percent from the year before.
• April’s not-seasonally adjusted index index was 133.5 a 11.0 percent increase from March and a 24.6 percent increase from a year ago.
• The only region that saw a month-over-month decline in pending home sales (seasonally adjusted) was the South region, after having the largest month-over-month increase last month, it saw a decrease of 0.6 percent from March, but was still up 31.3 percent from a year ago.
• The Northeast had the largest month-over-month increase in pending home sales (seasonally adjusted) with a 29.5 percent increase from March.

Lawrence Yun, NAR chief economist, said this second round of surging sales from the tax credit extension looks as strong as the original tax credit. “There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension. But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales,” he said. “The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.” NAR expects a net of 1 million additional jobs in the second half of this year and about 2 million in 2011.

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