Have Existing-Home Sales Hit Bottom?

Leading indicators point to ‘modest gains’ for fall, says PMI

By Inman News, Thursday, September 16, 2010.

Two leading indicators — applications for purchase mortgages and the number of homebuyers entering into contracts to purchase homes — suggest sales of resale homes hit bottom in July and will rebound this fall, economists at mortgage insurer The PMI Group Inc. conclude.

In their latest monthly Housing and Mortgage Market Review, PMI Chief Economist David Berson and analyst Brett Soares make a case that existing-home sales will show “some modest gains” in August, September and even October.

After hitting a low in the first half of July, purchase mortgage applications have edged up slightly, the report noted, citing statistics gathered by the Mortgage Bankers Association.

Because of the time it takes to approve a loan and close a home sale, loan applications submitted in August might not show up in statistics on existing-home sales until October.

Another leading indicator, which counts the number of homebuyers who have entered into purchase contracts — the National Association of Realtors’ pending sales index — was up 5.2 percent in July.

“This is consistent with the increase in the MBA’s purchase applications, and the two of them together strongly suggest that sales have bottomed out, at least for now,” PMI economists said.