The price-reduction effect of foreclosed for sale inventories has pushed up the increase in pending home resales in the U.S. in June, based on nationwide real estate data.
In June, the number of signed agreements to buy existing homes increased for the fifth consecutive month and surpassed economists’ predictions, as lower mortgage rates and lower home prices attracted home buyers.
The index of agreements to buy existing homes increased by 3.6 percent in June, a substantial jump from the 0.8 percent gain in the previous month.
According to housing analysts, first-time homebuyers taking advantage of tax incentives and foreclosure-driven home price declines have been making a significant contribution to the stabilization of the housing market.
However, these analysts added that the rising unemployment rate and the possible rise in mortgage rates will make it difficult for the market to sustain a recovery.
4Cast senior economist David Sloan said the rise in the index of pending sales indicates a modest recovery in the housing sector. He is however still concerned about consumer confidence.
Economists interviewed by Bloomberg previously predicted that the index would rise by 0.7 percent, following the reported 0.1-percent rise in May. Estimates from the economists ranged from a decline of 1.2 percent to a gain of 3 percent. Economist Sloan was one of the 3 economists who made the highest estimate.
Meanwhile, sales of pre-owned homes in June increased for the third consecutive month, affirming the prediction that the downturn of the housing sector will end this year. The median price declined by 15 percent compared to June 2008.
In addition, data from the Commerce Department indicated that sales of newly-built homes in June soared by 11 percent, the biggest increase since 2000.
The affordability index hit its highest level of 178.8 in April, and then dropped to 159.2 in June. The affordability index considers home prices, mortgage rates and household incomes. Index readings higher than 100 mean that a household earning the area’s median household income can afford to buy a median-priced house at current home loan costs.
The home building industry has also reported some level of resurgence from its historic lows. Home builder M.D.C. Holdings said its orders for its Richmond America Homes have been increasing for the first time in 4 years.
According to the economists interviewed by Bloomberg, unemployment is the factor slowing down continued recovery. They said the U.S. unemployment rate, currently at 9.5 percent, may surpass 10 percent in the first months of 2010.
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