Realtors group says pending home sales climb

Pending home sales rose for the eighth month in a row in September, marking the longest upward streak for the number of monthly contracts signed since 2001, the National Assn. of Realtors reported this morning.

The Washington-based association said that its Pending Home Sales Index rose 6.1% to 110.1 from a reading of 103.8 in August, and is 21.2% higher than in September 2008, when it was 90.9. The annual gain was the largest annual increase since the association began measuring the statistic in 2001.

Lawrence Yun, chief economist for the association, attributed the uptick to a surge in home-buying by first-time shoppers looking to take advantage of a federal $8,000 tax credit scheduled to expire Nov. 30.

"What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,” Yun said in a statement.

Experts say the tax credit helped stabilize home prices over the summer, though some have voiced concern that both volume and price will fall if Congress allows the credit to expire. The NAR is pushing for an extension, and  could very well get its  wish. Democrats on Capitol Hill may pass legislation extending the credit as early as Tuesday, according to news reports last week.

Critics of the tax credit contend that the subsidy has pushed up home prices artificially and that the housing market will suffer declines much like the auto industry did following the expiration of the popular Cash For Clunkers program.

“It is propping up the market,” said Roberton Williams, a senior fellow at the Tax Policy Center in Washington.

Investment bank Goldman Sachs estimated in a recent report that all of the government’s policies taken to stabilize the housing market  — reducing foreclosures, slowing the pace of distressed sales and stimulating demand through the tax credit  — may have added 5% to home prices nationally.  Once those policies expire, “The risk of renewed home price declines remains significant,” according to the report.

-- Alejandro Lazo

Comments

[Rich]

As for Goldman's comment, the $8,000 tax credit represents about 5% of a $160,000 house, which is in the pricing sweet spot of first time buyers outside the bubble markets, so that one's a wash. I would bet that closer analysis will not reveal any 5% price bump for the $300k+ end of the market. The problem for the market now is what happens when the renewed credit ends in April just as the house-shopping season begins in the northern states. Given the seasonal factor we could see prices plummet throughout the winter even with the tax credit in place, and plummet even further in the late spring without it...