The Wall Street Journal

June 9, 2008

WASHINGTON — A forecasting gauge of home sales climbed to its highest level in six months during April, given a lift by bargain hunters.

 The National Association of Realtors’ index for pending sales of previously owned homes rose 6.3% to 88.2 from March, the industry group said Monday.

Private analysts projected pending sales would be unchanged during April. The rate was the highest since 89.8 last October.

Lawrence Yun, NAR chief economist, said pending sales contracts picked up in areas where housing prices have dropped significantly.

“Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it’s unclear if they are investors or owner-occupants,” he said.

In its monthly forecast on the industry, the NAR projected existing-home sales at 5.40 million this year and 5.74 million in 2009. That compares with 5.65 million in 2007.

The median price for an existing home is seen at $205,000 in 2008 and $213,900 in 2009. It was $218,900 in 2007.
A month ago, the NAR forecast 2008 sales at 5.39 million and 2009 sales at 5.72 million. The 2008 median price was projected at $213,700 and the 2009 price at $222,600.
The NAR pending sales index, based on signed contracts for previously owned homes, was 13.1% below the level of 101.5 in April 2007.

The NAR’s pending home sales index was designed to try measuring which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.

By region, pending sales in the Northeast decreased 1.9% in April from March; they had fallen 12.2% since April 2007. The Midwest rose 13.0% in April from March; it had dropped 13.1% since April 2007. The South increased 4.6% in April from March; it had fallen 22.5% since April 2007. The West increased 8.3% in April from March; it has gone up 4.0% since April 2007.

The NAR sees improvement in the market as mortgages become more affordable. “Recent declines in mortgage rates on conforming jumbo loans and a return to sound but not overly stringent underwriting standards will permit more people to qualify for a loan,” said NAR President Richard F. Gaylord.