| Pending Home Sales Increase Significantly in August |
| Written by Jonathan Smoke | |
| 10.09.2008 | |
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Discuss this article on the forums. (0 posts) While the world is fixated on the financial markets’ recent swoon, the National Association of Realtors reported yesterday that pending home sales were up 7.4% in August over July. Perhaps even more important was the comparison to last year. August 2008’s reading of 93.4 was 8.8% higher than the 85.8 reading last year. Ironically, even though the index is a forward-looking indicator of what actual sales will be in the months ahead (like September), the reality is that September is already over. So even Lawrence Yun, the Chief Economist at NAR, had to acknowledge that the recent credit crisis may have made things worse. In NAR’s release Yun said: “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region. It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.”
The index rose in every region but most dramatically in the West, potentially because of bargain prices as a result of foreclosures. In the West, the index was up 18.4% over July. The Northeast, while still relatively weak compared to the other regions, posted a strong 8.4% monthly gain. The Midwest and South were only up slightly at 3.6% and 2.3% respectively. Only the South posted a year-over-year decline in August, as sales activity remained relatively strong in the South throughout 2007. From the tone of much analysis I’ve read in recent days, the financial swoon is expected to further dampen home sales because of a lack of confidence in the future and limited credit availability. However, it is possible that sales will continue to pick up. With the takeover of the GSEs, conforming loans should be readily available for those with good credit and the ability to fund a down payment. Therefore, with home prices lower and mortgage rates down, consumers may be even more tempted to buy a home—a hard asset that provides utility. After all, even though home prices may be down 20% over the last year based on the S&P Case-Shiller 10-city composite, the stock market is down that much in the last 30 days. 
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