WASHINGTON – The number of contracts signed to buy existing houses, co-ops and condominiums nationwide fell in January to their lowest level in at least eight years, as fears about the economy and uncertainty about federal housing stimulus plans combined to discourage buyers, the National Association of Realtors reported today.
The trade group’s Pending Home Sales Index – a leading indicator based on contracts signed during the month, and expected to close in the next 30 to 90 days – fell to 80.4 points (1982 = 100 points), the index’s lowest level since the NAR began tracking such data. The January reading represented a 7.7 percent decline from December’s revised score of 87.1 points and a 6.4 percent decline compared with the PHSI’s year-ago reading of 85.9 points.
“Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales,” said Lawrence Yun, the NAR’s chief economist. “We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit” that was included in the $787 billion American Recovery and Reinvestment Act of 2009 (ARRA).
Pending home sales fell most sharply in the Northeast, where the PHSI fell 12.7 percent to a January reading of 57.8 points. Among other regions, the South saw the index fall 11.2 percent to 82.2 and the Midwest saw a 9.2 percent decline to 72.6, while the West saw the PHSI rise 2.4 percent to a January reading of 103.6 points. Compared with January 2008, the PHSI fell 19.7 percent in the Northeast, 13.8 percent in the Midwest and 9.1 percent in the South but rose 13.5 percent in the West.
Meanwhile, however, the NAR’s Housing Affordability Index – based on buyers’ devoting 25 percent of gross income to mortgage payments and interest – rose 13.6 points to a record high of 166.8. (A reading of 100 points indicates that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home. Higher readings indicate housing is more affordable.)
“The relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970,” the trade group said. The January reading indicates that, with a 20 percent down payment, a median-income family earning $59,800 per year could have afforded a $283,400 home in January, up from a $263,300 property a year earlier.
“Conditions have been aligning very favorably for home buyers, with the exception of consumer confidence,” Yun said, adding: “I am hopeful that sales will turn around by late spring and early summer, because history suggests that home sales can rise even in times of job losses when housing affordability rises.”
Housing affordability rose most sharply in the West, where the HAI rose 11.6 percent to a January reading of 132.9 points, the NAR said. The Northeast saw the index rise 7.7 percent in January to 127.1 points, while the South saw a 7.2 percent increase to 208.8 and the Midwest saw a 5.4 percent rise to a January reading of 167.7 points. Compared with January 2008, the affordability index rose 45.1 percent in the West, 28.3 percent percent in the Northeast, 15.7 percent in the South and 11.4 percent in the Midwest.
The National Association of Realtors is the nation’s largest trade association, with more than 1.3 million members in all aspects of residential and commercial real estate. Additional information, including the latest pending home sales and housing affordability reports, is available at www.realtor.org.
Information about the federal government’s financial stabilization efforts – including the American Recovery and Reinvestment Act of 2009 signed into law on Feb. 17 (READ MORE) – is available at EconomicRecovery.gov.
