Gains for Pending Home Sales

The National Association of Realtors® reported today nine consecutive months of gains for Pending Home Sales. This according to the association this is a first for the series of the index since its inception in 2001.

The Pending Home Sales Index, is a forward-looking indicator based on contracts signed in October, the index rose 3.7 percent to 114.1 from 110.0 in September, and is 31.8 percent above October 2008 when it was 86.6. The rise from a year ago is the biggest annual increase ever recorded for the index, which is at the highest level since March 2006 when it was 115.2. Basically it is a predictor of homes that will close in the next month or two.

Much of the credit for home sales goes to the tax credit. The Federal tax credit spurred sales in both September and October. Locally, Alameda saw its best two sales months of the year in those months and those 61 days accounted for 31 percent of the sales for the first 10 months period.

Lawrence Yun, NAR chief economist, said home sales are experiencing a pendulum swing. “Keep in mind that housing had been underperforming over most of the past year. Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus,” he said. “This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future.

If I can summarize what Yun said in the release is: Based on our population we are not buying enough homes, but the tax credit is getting people interested. We can see that happening in Alameda. The challenge is inventory. Until we get more homes on the market the Island will continue to bounce along with the market.