After Recent Gains, Pending Home Sales Declining

The National Association of Realtors (NAR) notes that, after three straight months of gains, pending home sales for April 2012 decreased. While not welcome news to home buyers or sellers and industry professionals, there are still some positive features.

While the most recent Pending Home Sales Index (PSHI), published by the NAR, indicates a 5.5 percent decline from the first quarter of 2012, pending sales are still 14.4 percent above April 2011. As expected, pending home sales varied by region.

Regional Differences Are Dramatic in April

For example, in the Northeast, April pending sales rose almost one percent, displaying a 19.9 percent increase over last year. Other U.S. regions reported varying amounts of decrease. The always volatile West had the most dramatic decline at 12 percent. The South (6.8 percent) and Midwest (0.3 percent) recorded lower decreases in pending sales.

Yet, all other regions still recorded pending sales higher than in 2011. Industry observers believe this April 2012 decrease is, therefore, only a temporary downward spike. They maintain that the housing recovery is continuing to gain momentum.

Distressed and Foreclosed Properties also Declining

Part of the delay in a strong recovery remains the number of “distressed” home sales. Currently, distressed properties account for almost 33 percent of all home sales. Fortunately, the number of foreclosed properties also continues to decrease. NAR notes that “all of the major housing market indicators are expected to trend gradually up.”

This slow, but steady decline in troubled properties projects higher home prices in the coming periods. Some features of the housing recovery are dependent on indirect factors, such as the coming new federal budget and its features to fuel a stronger economic rebound.

Higher Values Help Homeowners Balance Their Budgets

Increasing and stabilizing home values help homeowners and the U.S. economy as a whole. Since the recession ended, there have been around 11 million homeowners who were “under water.” This large group owed more than their homes would bring if they sold them. Consequently, only those in a “must sell” condition offered their homes for sale. Still others simply “walked away” from their home and mortgage balance.

Higher home values means many of these homeowners can sleep better knowing the market price of their property is increasing. Reducing under water properties also helps buyers. Serious home buyers will find more homes on the market, helping them find the perfect house for them.

Although prices are higher, sellers, finally balancing their monthly budget, should be more comfortable with negotiating deals with qualified buyers. An overall modest home value gain of 10 percent in the coming months should reduce under water homeowners by around 4 million people.

While short-term pending sales are down around most of the U.S., the longer-term upward trend continues. With mortgage rates still low, this housing recovery bodes well for home buyers and sellers alike. Are you considering an active search for a new home?


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