Fed Officials Upbeat On U.S. Recovery

Two senior Federal Reserve officials were upbeat Monday about the U.S. economic recovery despite the worsening debt crisis in Europe, but gave no indication the Fed is anywhere near raising interest rates.
By: In-Soo Nam and William Mallard: wsj.com
“Right now, the prospects for continued growth in the U.S. remain relatively solid,” Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, told a news conference during a Bank of Korea seminar in Seoul.
“I hope, I anticipate at this point that the U.S. won’t have a double-dip recession.” He added that the European crisis “raises some clouds on the horizon” and that the Fed would have to “be cautious” in response.

Charles Evans, president of the Chicago Fed, said the U.S. recovery is “well under way” but still-low inflation means the central bank should keep rates very low “for an extended period,” in line with its official policy statement.

“Inflation is severely under-running price stability, so it’s still appropriate to keep an accommodative policy,” Mr. Evans told a separate news conference at the Seoul event. “But if the situation turns rapidly, policy will need to respond more quickly.”

A few weeks ago, many analysts expected the Fed to begin raising interest rates by the end of 2010. As the situation in Europe worsened in May, those expectations have been put off and now many analysts don’t expect the Fed to move until 2011.

Mr. Evans said the European crisis would likely damp U.S. exports to a small degree but that for now it wasn’t likely to have a big impact or change the outlook for Fed policy.

Fed Chairman Ben Bernanke, addressing the Seoul conference by video, said the world’s central banks will exit their economic-stimulus policies at different times, weighing local factors as they seek to be neither hasty nor tardy in tightening, U.S. Federal Reserve Chairman Ben Bernanke said.

“Because economic conditions vary, the appropriate timing of the exit is likely to differ across countries,” Bernanke said. “To guide these important decisions, each central bank will have to carefully monitor economic developments in its own jurisdiction.”

Mr. Plosser and Mr. Evans both cited recent improvement in the U.S. labor market as promising signs for the broader recovery and predicted the improvements will continue. Mr. Plosser said many people may be surprised by how fast employment bounces back, while Mr. Evans said that if inflation expectations should surge, the Fed would need to respond quickly–shifting its current emphasis on promoting growth.

Mr. Evans, asked about the outlook for the Fed to sell back some of the massive amount of mortgage-backed securities it has bought in a bid to provide liquidity to the financial system, said he expects this would come after the Fed unwinds other emergency measures.
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Bernanke Says Central Banks May Differ on Timing of Monetary Tightening

Federal Reserve Chairman Ben S. Bernanke said central banks around the world will probably unwind monetary expansion at different times because of differences among their economies.
By: Scott Lanman: bloomberg.com
“In the medium term, like the Federal Reserve and many other central banks, the Bank of Korea will have to manage its exit from accommodative policies,” Bernanke said in pre- recorded remarks to a conference hosted by South Korea’s central bank in Seoul today. The Bank of Korea “will have to weigh the risks of a premature exit against those of leaving expansionary policies in place for too long,” Bernanke said.

The Fed chief didn’t elaborate on the outlook for the U.S. economy or monetary policy. Bernanke praised South Korea’s response to the global financial crisis over the last few years, including its decisions to reduce its policy interest rate by 3.25 percentage points and to set up a fund to keep its banking system stable.

“This suite of policy responses helped stabilize Korean financial markets and promote a swift recovery of economic activity,” Bernanke told the Bank of Korea event, according to a text distributed by the Fed in Washington.

South Korea’s stock market has erased much of its losses since late 2008, and gross domestic product has “rebounded decisively” since contracting at a 17 percent pace in the fourth quarter of 2008, he said.

Asset Purchases

In the U.S., the Fed cut its benchmark interest rate to near zero in December 2008 and purchased $1.7 trillion in Treasuries and housing debt to revive growth. Officials are debating when and how fast to raise rates and sell mortgage assets. “Because economic conditions vary, the appropriate timing of the exit is likely to differ across countries,” Bernanke said.

Countries must cooperate to improve financial regulation and ensure that firms are “well capitalized, liquid and transparent,” Bernanke said. The leadership of the Group of 20 countries is “essential” for producing effective and consistent changes, Bernanke said.

In addition, central banks “must continue to place great weight on the factors that have been shown to enhance the credibility and effectiveness of monetary policy: central bank independence, accountability and transparency, and effective communication,” the Fed chief said.
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Homeowner Confidence Rises Nationally, But Western Homeowners Remain Pessimistic

As some parts of the U.S. housing market work their way out of the housing recession, while the majority of markets continue to decline, homeowners across the country had mixed opinions of the state of their...
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own homes’ values, according to the Zillow Q1 Homeowner Confidence Survey. Nationally, homeowners were overconfident, with half (50%) believing their own home’s value declined in the past year. In reality, 65% of U.S. homes declined in value, according to Zillow’s Q1 Real Estate Market Reports.

Meanwhile, 7% of homeowners, which translates to 5.3 million homes, said they would be “very likely” to put their home on the market in the next 12 months if they see signs of the housing market improving. By comparison, 5.2 million existing homes were sold during 2009. An additional 8% said they would be “likely” to put their home on the market, and another 14% said they would be “somewhat likely.” These homeowners represent “sidelined sellers,” a component of shadow inventory that if materialized, could significantly delay timing of a market recovery.

The most pessimistic homeowners reside in the West, even as home values in many California and Colorado metros have stabilized over the past year, according to the Zillow Q1 Real Estate Market Reports. Eighteen percent of Western homeowners believe that their home gained value over the past year when in reality 31% of Western homes gained value. That resulted in a Misperception Index of -12 (a Misperception Index of zero would indicate that homeowner perception is in line with reality, and a negative Misperception Index indicates that homeowners are overly cynical about their own homes’ values).

On the other end of the spectrum were Southern homeowners, who were overly optimistic, even as many Southern markets continue to see significant decreases in home values. Thirty-four percent of Southern homeowners said that their home gained value over the past year when in reality 27% of homes gained value. That resulted in a Misperception Index of 14.

Homeowners in the Northeast and Midwest recorded Misperception Indexes of -2 and 4, respectively.

“It is clear that there is a lag between market realities and public perceptions of home values. For quite a while after the market peak, Western homeowners continued to believe their own homes’ values were doing better than they were in reality,” said Zillow Chief Economist Dr. Stan Humphries. “Conversely, after years of press coverage about declining home values, homeowner perceptions are now in line with market conditions from early last year, although the Western market has improved since then.

“We see the opposite phenomena in the South where home values in most markets – with the exception of Florida – took some time to begin falling. Many markets there have recently joined the housing recession in earnest, with five of the nine Southern states tracked by Zillow hitting their home value peak after 2007, but homeowners there are likely to believe the downturn has not affected them. This could also be a result of the fact that most attention has been on the hardest-hit areas of California, Florida, Nevada, Arizona and Michigan, and homeowners outside of these markets may have less information about what has happened in their local markets.

“However, when homeowners across the country do start to believe that their home’s value has stopped declining, we can expect to see a lot of new inventory entering the market via sidelined sellers. This added inventory, combined with current elevated inventory levels and continued high rates of foreclosure in many areas, will likely serve to keep home values treading near the bottom for several years. Inventory must come down for home values to go up.”

Homeowner Perception of Future Home Values
Looking forward, homeowners are fairly positive about their own home’s value over the next six months, but like Misperception Index, the degree of optimism varies wildly among regions. In the Northeast, more than half (51%) of homeowners believe their home’s value will increase over the next six months while in the Midwest less than one-third (29%) of homeowners believe their home’s value will increase. Nationally, 39% of homeowners believe their own home’s value will increase during the next six months.
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Bernanke `Extended Period' Resolve May Be Eroded as Delinquencies Decline

Consumer delinquency rates are dropping at U.S. retailers and banks such as American Express Co. and Bank of America Corp., signaling an incipient lending thaw that may spur economic growth.
By Bob Willis and Anthony Feld: Bloomberg.com
Past-due loans at Bank of America, the second-largest card lender, fell for a fifth month in April and by the most in four years, while AmEx’s delinquencies were down 34 percent from a year earlier. Target Corp., the second-largest U.S. discount retailer, last week reported its lowest delinquency rate in the latest quarter since the second quarter of 2008.

With fewer tardy borrowers to worry about, banks are more likely to extend fresh credit to American consumers, whose spending makes up 70 percent of the economy. That may weaken Federal Reserve Chairman Ben S. Bernanke’s commitment to an “extended period” of low interest rates - once policy makers determine the European debt crisis no longer poses a risk to the recovery, said economist Stephen Stanley.

“Then we get back to the scenario where the U.S. banking system is gradually healing, credit quality is gradually improving and creditworthiness of borrowers is improving,” said Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “Some evidence of stability in the banking sector is an additional precondition to normalizing monetary policy.”

U.S. central bankers on April 28 kept the benchmark federal funds rate in a range of zero to 0.25 percent, where it has been since December 2008, and said “subdued” inflation and high unemployment are likely to keep rates “exceptionally low.” They repeated their assessment that consumer spending was likely to be restrained by “tight credit.”

‘Reasons for Optimism’

Bernanke, in a May 6 speech in Chicago, said bankers’ attitudes on lending “may be shifting,” citing as “reasons for optimism” the economic recovery and expectations among senior loan officers for a “modest reduction” in troubled loans. The comments were overshadowed by that day’s 9.2 percent intraday plunge in the Dow Jones Industrial Average, which was sparked in part by concerns about euro-zone defaults.

“The Fed chairman is getting closer to saying the economy has reached a turning point, and the confidence he expressed was overlooked due to the market’s extreme volatility,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “When we look back some months from now, his remarks may be seen as prescient in forecasting a sustainable economic recovery.”

Loan Officer Survey

The Fed’s latest survey of senior loan officers, released May 3, showed the smallest proportion of banks in two years restricted lending standards in the first quarter. Other Fed data released May 7 showed consumer borrowing unexpectedly rose in March for the second time in three months, signaling Americans are becoming more optimistic about the recovery.

“One of the factors the Fed watches when deciding when it’s appropriate to begin normalizing rates is when banks stop tightening lending standards,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “This is starting to happen.”

Economists surveyed by Bloomberg between April 29 and May 10 cut their forecasts for Fed rate increases to a quarter point rise in the fourth quarter from the half point gain forecast in the month-earlier survey.

“If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” said Jay Bryson, a senior global economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who formerly worked at the Fed in Washington.

Target Profits

Minneapolis-based Target reported May 19 that credit-card loans more than 60 days overdue declined to 5.3 percent of the total in the first quarter, from 6.3 percent in the previous period, helping it post profits that beat analysts’ projections.

Citibank’s new U.S. card account originations fell 17 percent in March from a year earlier, about half the 35 percent drop posted in January. Originations climbed 3 percent in February, which was the first annual gain since the data started being reported in Oct. 2008, according to the Treasury’s monthly lending report.

“The fundamentals here in the U.S. are suggesting the Fed should already be on a path towards tightening,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which manages about $30 billion in client accounts. “They should already be taking some action to be preparing to raise rates; however, the drama overseas is likely to encourage policy makers to pursue a cautious path.”
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Addicted to Real Estate

By now, everyone knows the financial reasons for the housing bubble, from lax lenders to greed.
By: JUNE FLETCHER: wsj.com
But there's another, emotional side: In our rootless and confusing culture, our domiciles have become more than mere shelters, investments, havens or even status symbols. Rather, they have become extensions of our narcissistic personalities, glorified by entire industries of shelter magazines, websites and cable networks.

It's no wonder, writes Meghan Daum in her new book "Life Would Be Perfect If I Lived In That House," (Alfred A. Knopf), that by the middle of the decade, scads of Americans were "buying real estate and melting it down to liquid form and then injecting it into their veins."

It was an addiction shared by Ms. Daum, an essayist, novelist and columnist for the Los Angeles Times. And it almost ruined her life, she writes.

Fully aware of how neurotic such an obsession is, Ms. Daum examines it neurotically, almost as if she were a recovering abode-aholic. She reveals personal details that—even in this blogging age—sometimes made me a bit squeamish (do I really need to know about the dog poop on the patio of one of her many temporary abodes)?

Nevertheless, her candor also reveals the roots of her restlessness: Her jingle-writing father, who settled the family in New Jersey, really longed to live in Manhattan, while her creative and frustrated mother channeled her suburban ennui into constant redecorating and endless trips to open houses.

Ms. Daum doesn't make the connection overtly, but the reader feels how much she internalized this sense of familial dislocation and discontent (her parents eventually separated). Her longing for a safe place where she'd belong is revealed in one bittersweet childhood anecdote: Instead of fantasizing about a grand wedding, like most little girls, she re-enacted cozy scenes from Little House on the Prairie.

By the time she was a Vassar student, Ms. Daum simply assumed that your habitat defined you. And yet, no place ever quite felt right. She blew through a succession of dorm rooms, and then overpriced Manhattan apartments. But, as she wrote more than a decade ago in a widely-read New Yorker essay, she could never afford the sort of glamorous place she salivated over in decorating magazines, and wound up buried in about $80,000 of debt. Worse, her materialistic aspirations also impoverished her spirit: At one point, her aesthetic snobbery caused her to evict a roommate simply for the sin of owning a baby-blue carpet and orange chair.

“ By the middle of the decade, scads of Americans were "buying real estate and melting it down to liquid form and then injecting it into their veins." ”

Fortunately, she tired of this shallow identity and tried on a new one, inspired by her Prairie fantasies. Unfortunately, her restlessness remained. In friendlier and more affordable Lincoln, Neb., she donned and discarded a series of farmhouses, as well as a boyfriend. By now, her obsession is full-blown: The houses are described in loving detail; the boyfriend is simply called "an aging slacker." Inevitably, the nameless boyfriend soon becomes known as the Ex. She also acquires a dog during this phase, named Rex.

During her Nebraska days, she wrote a novel, "The Quality of Life Report," which attracts the attention of Hollywood. So she packs up again and moves to Los Angeles, Rex in tow, to re-frame her life in a series of unsatisfying rentals that she deems too tacky to show to potential dates—so she stops going on them. She becomes ever lonelier, but doesn't yet connect the dots of her disconnection. She describes the problem as "being alone with awful furniture."

The solution, she decides, was to commit—not to a person, but a house. Unfortunately, she starts searching at the height of the bubble, and so has to settle for a tiny stucco box with dirty white carpet and a dilapidated garage. (She's now about $100,000 underwater on her mortgage, she writes.) Still, ripping up the carpet, installing stainless-steel ceiling fans and buying a purple futon seem to settle her—so much so, that she soon begins spending far too much time alone in her pajamas in her newly remodeled kitchen, eating Stovetop stuffing.

At this point, a reader may want to scream: "It's time to break up with the house!" But Ms. Daum doesn't realize this obvious fact until a promising new boyfriend tries to move his bikes and books in, and their arguments (including whether or not to saw his beloved sofa in half) threaten to derail the relationship.

I don't want to spoil the ending, so I'll just mention the opening scene in the book, set in the present day, when a chunk of stucco siding falls off in Ms. Daum's hand and–instead of running to a repairman–she simply throws it away.
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Mortgage rates sink to lowest this year

Mortgage rates have fallen to the lowest level of the year as investors poured money into the safe haven of U.S. government securities.
By: ALAN ZIBEL: AP Associated Press
The average rate on a 30-year fixed rate mortgage dipped to 4.78 percent this week from 4.84 percent a week earlier, mortgage company Freddie Mac said Thursday. It was the lowest level since early December, when rates fell to a record low of 4.71 percent.

The average rate on a 15-year fixed-rate mortgage fell this week to 4.21 percent_ the lowest level in nearly two decades.

Concerns over the European debt crisis have sent yields for 10-year and 30-year Treasury bonds to their lowest levels of 2010. Rates on 30-year home loans often rise and fall in line with the 10-year note.

Analysts say the opportunity may not last. If Europe's woes subside and the U.S. economic recovery stays on track, rates are likely to move higher. That's because traders will move their money back into riskier investments.

"Strike now," said Greg McBride, senior financial analyst at Bankrate.com. "If they move quickly against you, it just takes money right out of your pocket."

Homeowners appear to be taking notice. Applications to refinance surged this week to the highest level since October 2009, the Mortgage Bankers Association said Wednesday.

But mortgage applications to purchase homes fell to the lowest level since April 1997. A major reason for that drop: tax credits expired on April 30.

A campaign by the Federal Reserve to reduce borrowing costs for consumers pushed rates down to extraordinarily low levels last year. Rates were expected to rise after the program ended this spring. Instead, they have dipped. Fears that Greece's government would default on its debt shook world markets and boosted demand for U.S. Treasurys.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

Rates on five-year, adjustable-rate mortgages averaged 3.97 percent, up from 3.91 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 3.95 percent from 4 percent. That was the lowest average since May 2004.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year loans was 0.6 of a point.
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Sales of previously owned homes up 7.6% in April

Completed purchases rose in every region but the West, where they fell 6.2% as California buyers delayed closing deals to take advantage of a tax credit.
By: Alejandro Lazo: latimes.com
The National Assn. of Realtors attributed the increase in sales of previously owned homes in April to cheap prices, low interest rates and federal tax incentives that expired April 30. Above, a house for sale in Maryland. (Jonathan Ernst, Reuters / May 23, 2010)

Fueled by federal incentives for home shoppers, the U.S. housing market gained ground in April with sales of previously owned dwellings jumping 7.6% from March, the National Assn. of Realtors said Monday.

Buyers were motivated last month by cheap prices, low interest rates and federal tax incentives that expired April 30, the Washington real estate group said. Sales jumped in every region but the West, where they fell 6.2% as shoppers appeared to time purchases to take advantage of a tax credit in California.

To qualify for the federal credit of up to $8,000 for first-time buyers and up to $6,500 for certain current homeowners, contracts had to be signed by the end of April and those deals must close by June 30. The California tax credit of up to $10,000 for some purchases requires deals to close May 1 or after.

The national median home price — including single-family homes, town homes and condominiums — was $173,100 in April, up 1.4% from March and 4% from April 2009.

Economists are predicting sales will fall later this year after the tax-credit surge ends. The weak recovery in housing will probably continue if the job market improves, although the possibility of more foreclosures hitting the market remains a concern, economists said.

"In the grand scheme of things, housing is affordable again. Lenders aren't really tightening standards anymore. And the employment situation has stabilized. That's the good news," said Michael D. Larson, a housing and interest rate analyst with Weiss Research.

"The bad? The backlog of distressed homes remains extremely high. Uncle Sam is just about the only guy making or backing home loans. And we're certainly not seeing a rip-roaring rebound in the job market," Larson said.

The National Assn. of Realtors' data are based on its proprietary multiple-listing service and are reported as a monthly estimate that is adjusted for seasonal variations. Homes sold at a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, the group said. Sales were up 22.8% from the 4.7-million-unit pace in April 2009.

Housing inventory jumped 11.5% at the end of April to 4.04 million previously owned homes available for sale, representing an 8.4-month supply at the current sales pace. That was an increase from an 8.1-month supply in March.

Regionally, resales of all types of homes surged 21.1% from March in the Northeast, 9.9% in the Midwest and 8.6% in the South. Sales fell 6.2% in the West but rose 5.2% from April 2009.

In California, April sales of single-family homes totaled 483,830, down 6.4% from March and off 8.1% from April 2009, according to the California Assn. of Realtors. The median price of a previously owned single-family detached home in the state was $306,230 in April, edging up 1.5% from March and jumping 21% from April 2009.

"It's likely that the state tax credit that went into effect May 1 created an incentive for many buyers to postpone closing escrow so they could take advantage of both the state and federal tax credits that were available," said Steve Goddard, president of the California real estate group. "We should see the pace of closed sales edge up in May and June as these tax-incentivized transactions close."

A report last week by San Diego real estate research firm MDA DataQuick showed that sales of new and previously owned homes in California declined 1.3% in April from the same month last year. April sales in Southern California fell year-over-year for the first time in 22 months.

Analysts attributed that decline to fewer foreclosures on the market as well as some buyers possibly timing their purchases to take advantage of the California tax credit.
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Consumer Confidential: Home sales soar, Ford goes electric, cable TV saved

Here's your heavens-to-Murgatroyd Monday roundup of consumers news from around the Web:
--Uncle Sam wanted people to buy homes last month, and he got what he wanted.
By: David Lazarus: latimes.com
A last-minute rush to take advantage of an expiring tax credit caused sales of existing home to soar almost 23% from a year earlier. The National Assn. of Realtors said the increase topped expectations and suggested the housing market was regaining some health. "For people who were on the sidelines, there's been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low," says Lawrence Yun, an economist with the organization. Now let's see how we do without the tax credit.

-- Our friends at Ford Motor Co. say they want up to a quarter of their vehicles to run on electricity. To achieve that lofty goal, the company says it will invest $135 million and add 220 jobs at three Michigan facilities. The short-term aim is to get at least five electric vehicles on the market by 2012. As many as 25% of Fords will be battery-powered within a decade, the company says. An ambitious plan. I'll believe it when I see it.

-- Whew, that was close! Remember the wayward satellite that was supposed to disrupt cable programming throughout the United States? Well, the owner of the cable satellite, SES World Skies, now says that off-course bird kept its distance, and thus box watchers nationwide were able to enjoy their hundreds of cable channels without interruption (not counting commercials, of course). Imagine if "Lost" had gone off the air during the big finale. There would have been rioting in the streets. Or at least a whole lot of griping.
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The Weekend Guide for May 20 - May 23, 2010

What to Do This Weekend!
The Weekend Guide for May 20 - May 23, 2010.

Full Article:
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Mortgage Rates on 30-Year U.S. Loans Fall to 4.93%

U.S. mortgage rates fell for the third straight week as investors filled a void left by the end of a Federal Reserve program to purchase bonds backed by home loans.
By: Prashant Gopal: Bloomberg
Rates for 30-year fixed loans dropped to 4.93 percent in the week ended today from 5 percent last week, Freddie Mac said in a statement. The average 15-year rate was 4.3 percent, the McLean, Virginia-based mortgage finance company said.

Low home loan rates may help support a housing recovery as a government tax credit for homebuyers expires. The central bank has pledged to keep rates low for an extended period as the economy recovers. Home prices rose in 91 U.S. metropolitan areas in the first quarter compared with a year earlier, the National Association of Realtors said May 11.

Falling rates will help people “save a couple bucks on mortgage payments” when they refinance a home loan, said Keith Gumbinger, vice president at HSH Associates, a mortgage-data company in Pompton Plains, New Jersey. Declining borrowing costs also provide a boost to buyers who missed the government’s April 30 deadline for a tax credit of as much as $8,000, he said.

This week’s rates, the lowest since Feb. 18, might have been influenced by investors flocking to less risky securities such as Treasuries as the Greek debt crisis unfolded and the Dow Jones Industrial Average took an unexpected plunge, Gumbinger said.

Sales Gain

Home sales in the U.S. gained in March as buyers took advantage of a tax credit of as much as $8,000 that required recipients to sign contracts by April 30. New home sales surged 27 percent in March, the biggest gain since recordkeeping began in 1963, according to the Commerce Department. An index of signed purchase agreements for previously owned homes rose 5.3 percent in March, the Realtors group said May 4.

The Mortgage Bankers Association’s index of mortgage applications rose 3.9 percent in the week ended May 7. The portion of refinancings climbed 15 percent. Applications to purchase fell 9.5 percent.
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Pending Home Sales on an Upswing

Pending home sales increased again in March 2010, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of Realtors®.
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The Pending Home Sales Index (PHSI) forward-looking indicator based on contracts signed in March, rose 5.3% to 102.9 from 97.7 in February, and is 21.1% above March 2009 when it was 85.0; this follows an 8.3% increase in February. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit. “Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” he said. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”

The PHSI in the Northeast declined 3.3% to 75.1 in March but remains 27.2% higher than March 2009. In the Midwest the index increased 1.2% to 98.9 and is 18.5% above a year ago. Pending home sales in the South jumped 12.7% to an index of 121.2, which is 28.3% higher than March 2009. In the West the index rose 1.9% to 99.9 and is 8.8% above a year ago.

“Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. “As bank balance sheets strengthen, it is just a matter of time before lending of non-government-backed mortgages steadily opens up.”

The National Association of Realtors, “The Voice for Real Estate,” is one of America’s largest trade associations, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
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Pending Home Sales on an Upswing

In March, the Pending Homes Sales Index rose 5.3 percent and is well above 2009 levels.
NAR: REALTOR®Magazine
Pending home sales increased again in March, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, rose 5.3 percent to 102.9 from 97.7 in February, and is 21.1 percent above March 2009 when it was 85.0; this follows an 8.3 percent increase in February. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit. “Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” he said. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”

Regional Numbers
The PHSI in the Northeast declined 3.3 percent to 75.1 in March, but remains 27.2 percent higher than March 2009.
In the Midwest the index increased 1.2 percent to 98.9 and is 18.5 percent above a year ago.
Pending home sales in the South jumped 12.7 percent to an index of 121.2, which is 28.3 percent higher than March 2009.
In the West the index rose 1.9 percent to 99.9 and is 8.8 percent above a year ago.

“Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. “As bank balance sheets strengthen, it is just a matter of time before lending of non-government-backed mortgages steadily opens up.”
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