| The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in February, rose 2.1 percent to 82.1 from a reading of 80.4 in January, but is 1.4 percent below February 2008 when it was 83.3.
Lawrence Yun, NAR chief economist, said the market is continuing to underperform. "Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we'll see additional sales gains," he said. "More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity."
Also in February, NAR's Housing Affordability Index rose to a new high.
The PHSI in the Northeast rose 10.6 percent to 63.9 in February but is 11.2 percent below a year ago. In the Midwest the index jumped 14.5 percent to 83.1 and is 3.4 percent higher than February 2008. The index in the South rose 4.4 percent to 85.8 in February but is 0.1 percent below a year ago. In the West the index fell 13.5 percent to 89.6 and is 1.7 percent below February 2008.
NAR's Housing Affordability Index rose 0.9 percentage points to a record high of 173.5 in February from an upwardly revised index of 172.6 in January, and is 36.3 percentage points higher than a year ago. The HAI, a broad measure of housing affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
A median-income family, earning $59,700, could afford a home costing $285,600 in February with a 20 percent downpayment, 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 downpayments are roughly 80 percent of that amount. The affordable price is considerably higher the median existing single-family home price in February, which was only $164,600.
Last year at this time, the typical family could afford a home costing $265,600, which is $20,000 less than the current affordable price. "Homes in many areas are now selling for less than replacement construction costs – clearly this is an abnormal situation which will change once inventory is drawn down and supply and demand come closer into balance," McMillan said.
Yun said he expects housing inventories to rise through early summer from a normal seasonal pattern of more sellers appearing in the spring. "But with the positive housing stimulus incentives now in place, we expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory," he said. "Under these conditions, we should see price stabilization in most markets by the end of the year." |
V 1.0
