Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing.

“Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he says. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

Region

• Northeast: The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago.
• Midwest : In the Midwest, the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008.
• South: The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago.
• West: In the West, the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

The Effects of Appraisals
NAR President Charles McMillan says the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he says. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan says sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he adds.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. “

Affordability at a high
NAR’s Housing Affordability Index remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun says.

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.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent down payment, 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 down payments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

First-time buyer tax credits offers a boost
The first-time buyer tax credit also is benefiting the market. “Strong activity by entry-level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun says

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun says. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

— NAR

Approximately 973 homes changed hands during the month, up 6.7 percent from April’s figures though down 15.3 percent from May 2008, according to the Greater Tulsa Association of Realtors.

The year-to-date home sale total now stands at 3,993, down 13 percent from the first five months of 2008. Through April, the difference was 8.9 percent.

Still, Gloria Allred, president of Northeast Oklahoma Real Estate Services — the multiple listing service that compiles home sales data — said the monthly increase is an encouraging sign.

“We’ve been gradually coming up every month this year,” she said. “The stimulus program has helped us a lot.”

She was referring to the American Recovery and Reinvestment Act of 2009, which gives an $8,000 incentive to first-time home buyers. Allred added that the warming weather and a relatively strong local economy also helped sales in May.

May’s home price median — the point at which 50 percent of homes sold for more and 50 percent sold for less — held steady with the year-ago level, though the average price dropped nearly $7,500.

Allred said the latter number may have been influenced by the surge in first-time buyers. “First-time home buyers tend to buy smaller properties,” she said.

Across the nation, home sales rose 1.9 percent in May to a seasonally adjusted annual rate of 4.25 million, according to the National Association of Realtors. The number, however, is 3 percent below May 2008’s sales rate.

The national median sales price was $173,000 in May, down 16.8 percent from a year earlier.

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.


Here is more information about how the 2009 First-Time Home Buyer Tax Credit can help prospective home buyers become part of the


Who Qualifies?
First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.


To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.


Which Properties Are Eligible?
The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.


How Much Will the Credit Be?
The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:


The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.


The buyer’s income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.


If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.


The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.


Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale.

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