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Vero
Beach Pending home sales up for third month
Vero Beach Homes for Sale
Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit
now from the first-time buyer tax credit, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7 percent to
90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5.
“Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is
beginning to impact the market,” says Lawrence Yun, NAR chief economist. “Since first-time buyers must finalize
their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark
more sales by repeat buyers.”
The Pending Home Sales Index in the Northeast shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year
ago. In the Midwest the index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008. The index in the South
slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago. In the West, the index rose 1.8
percent to 94.8 but is 2.9 percent below April 2008.
NAR President Charles McMillan says there are numerous buyer assistance programs around the country. “Some states
are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but
there are many other local government and nonprofit programs available to buyers, depending on location.
“Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans to buy
down the interest rate or make a larger downpayment.”
NAR’s Housing Affordability Index (HAI) is in record territory. The index rose to 174.8 in April from an upwardly
revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of
this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time,
which examines the relationship between home prices, mortgage interest rates and family income. Tracking began in
1970.
A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20 percent
downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability
conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount.
The affordable price was well above the median existing single-family home price in April, which was $169,800.
Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is
subject to greater variability.
“In addition, the relationship between contracts on pending home sales and closings on existing-home sales is
taking longer than in the past for several reasons,” Yun says. “Mortgage processing time has increased, it is
taking many months to close on those homes requiring short sales with lender approval, and some sales are falling
through at the last moment.”
The total number of existing-home sales is expected to improve but with dramatic local market variation in the
timing of recovery. “The market has already bottomed in some areas, but this is an unusual housing cycle with some
areas improving rapidly while others languish or decline,” Yun says.
by Alfred Koenig - May 2009
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