Surge in Pending Home Sales Continues

Pending home sales have risen for three consecutive months, reflecting the broad impact of the home buyer tax credit and favorable housing affordability conditions, according to the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, a forward-looking indicator, rose 6.0 percent to 110.9 based on contracts signed in April, from an upwardly revised 104.6 in March, and is 22.4 percent higher than April 2009 when it was 90.6. That follows gains of 7.1 percent in March and 8.3 percent in February. Pending home sales are at the highest level since last October when the index reached 112.4 and first-time buyers were rushing to beat the initial deadline for the tax credit. 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 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.

“The home buyer tax credit brought close to 1 million additional buyers into the market, which is now helping the trade-up market and has significantly improved the inventory situation. This stabilized home prices more quickly and has preserved about $900 billion in home equity; in turn, that is keeping additional households from going underwater and risking foreclosure,” Yun said.

Pending Home Sales Index by region:
Northeast: jumped 29.5 percent to 97.9 in April and is 24.5 percent above a year ago.
Midwest: rose 4.1 percent to 104.2 and is 17.9 percent above April 2009.
South: slipped 0.6 percent to an index of 123.9, but is 31.3 percent higher than a year ago.
West: increased 7.5 percent to 107.9 and is 12.0 percent higher than April 2009.

“A big concern surfacing recently is insufficient time to close the deal at the settlement table. Under normal circumstances, two months would be enough time from contract signing to settlement date,” Yun said. “However, the recent housing cycle has brought long delays related to the short sales approval process by banks, and from ongoing appraisal issues." He added that there could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems meeting the settlement deadline by June 30. Because of these market challenges, NAR has asked Congress to provide flexibility on the deadline for closing.

Source: NAR

L.A. County Rents Expected to Decrease

By Gregory J. Wilcox, Writer
Published: Apr 7, 2010

Apartment dwellers in Los Angeles County will catch a break this year with rents expected to drop 3.5percent, according to a forecast released today.

Vacancy rates will also drop but that won't slow rent decreases, said the Casden Multifamily Market Forecast compiled for USC.

The forecast said that between the fourth quarter of 2009 and fourth quarter of 2011, average rents will drop by 5.2 percent.

"Overall, Southern California will not see sustained increases in rents until the greater economic health of the region improves," said Tracey Seslen, co-author of the forecast.

The apartment sector is still reeling from the 225,000 jobs lost in the county during the brutal recession, she said.

The future health of the Southern California apartment market continues to be shaped by jobs, housing prices, the "shadow" market of rental homes and condos, and new construction, Seslen explained.

Housing prices have been rising and unemployment in the county is currently at 12.3 percent and many luxury condos that didn't sell during the recession have been turned into rental units.

The forecast shows that:

Between the fourth quarters of 2008 and 2009, the county's vacancy rate fell from 7.8 percent to 6.1 percent. It is expected to reach 5.2 percent by the end of 2011.

During the same period, average rents in the county declined from $1.85 a square foot to $1.73 a square foot.

The overall economic outlook for the county is expected to improve this year, but it will take time for the apartment sector to catch up, Seslen said.

Jim Clarke, executive director of the Apartment Association of Greater Los Angeles, said that the city was especially hard hit, with vacancy rate exceeding 12 percent in on some places like West Los Angeles.

As the recession deepened, some renters either moved back home or doubled up with friends.

That's forced apartment owners to reduce rents not only to attract new tenants but to also hang onto the renters they have.

Clark senses things are starting to turn around but recovery for this sector won't be quick.

"We're probably not going to feel it for another year," he said of a market rebound.

The Home Buyer Tax Credit - EXTENDED and EXPANDED!

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®

Nov. 5, 2009

More good news for consumers, our members, and the housing market recovery. Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As you may know, C.A.R. and our partners at NAR have worked for months urging Congress and the Senate to extend and expand this crucial piece of legislation. We expect President Obama to sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers. We expect that number to increase dramatically in the months ahead with this new legislation in place.