Northeast home sales are poised for a big spring bounce

Posted by: Prashant Gopal on June 2, 2009

In the latest sign of a bottoming real estate market, the National Association of Realtors said June 2 that its seasonally-adjusted index of sales contracts signed jumped for the third straight month, surging 6.7% in April compared to March and 3.2% compared to April 2008. It was the biggest monthly gain since October 2001 and the first year-over-year gain since August.

Pending home sales are considered a leading indicator because sales are typically finalized a month or two after contracts are signed.

Interestingly, the Northeast appears to be heading for a big bounce in home sales. The Pending Home Sales Index in the Northeast (made up of New England, New York, New Jersey and Pennsylvania) rose 32.6% from March and 0.8% from April 2008. Of course, not all of those contracts will lead to sales because mortgages can fall through and some contracts are contingent on a buyer selling a home elsewhere.

The Realtor group doesn’t breakdown the statewide pending home data but spokesman Walter Moloney told me that Maine, Rhode Island, and parts of New Jersey are beginning to “recover.”

It seems that the federal government’s $8,000 tax incentive for first-time buyers is working.

Vincent Valvo, group publisher The Warren Group, which puts out housing reports on New England, said first-time buyers are likely using the federal credit to buy foreclosed homes and other deeply-discounted properties.

But the activity does not yet constitute “such a wave that it will overcome all the housing problems we’ve had,” he said. “But it is better than it was.”

The state associations usually don’t track pending sales. But the Massachusetts Association of Realtors has just started collecting that data, though it doesn’t adjust for seasonal variations. For what it’s worth, single-family pending sales in Massachusetts increased 18.4% in April compared March but declined 8.5% compared to a year earlier.

Reader Comments

Chris

June 2, 2009 2:13 PM


Yes home sales will pick up which is good but let's keep in mind that close to 50% of existing homes bought in many markets are by investors. That banks are holding a huge amount of foreclosed homes off the market and that Alt A loans still have to reset starting in about 12 months.

So more foreclosed homes are still to hit the market and yes they will sell faster as we move forward.

Also sales always increase in the spring compared to the winter so I am not sure that this 18.4% means anything other than normal seasonal variations

Penny

June 2, 2009 2:14 PM

there is hope!!

Ken

June 2, 2009 2:24 PM

I have seen these stories before. "Pending" sales are now considered positive news. I have watching the online listings and many say they are pending or they have multiple offers but then the property remains listed for sale for the next 3-4 months at minimum.

and then there are all the other foreclosures that are not either being listed or still to come for those that had 5 year ARMS. So houses built in 2004,2005,2006 or so..add 5 years puts us into 2011.

Until house prices adjust accurately to reflect the actual NET income of the buyers out there nothing will change.
This alone is probably the best indicator of any real change in the market.

bartz

June 2, 2009 2:52 PM

Let me know how that works out, Hope & Green Shootz Brigade. What a steaming load of LIES.

D

June 2, 2009 2:53 PM

This article lacks research.

The "pending" data from the NAR is meaningless, because they recently changed the definition of "pending" in order to make the numbers look better. One in three "pending" sale in Q1 failed to close within 30 days in Washington State.

As yet another example of a lone blogger doing better research and analysis than "old" media, see:

See http://seattlebubble.com/blog/2009/05/07/one-in-three-q1-pending-sales-failed-to-close-in-30-days/

Mama Bear

June 2, 2009 2:53 PM

That was w/ deep price reductions and mortgage rates under 5%. Let's see how the numbers come in after last week's interest rate jump.

Peter

June 2, 2009 3:25 PM

Sure the $8000 incentive is helping first time home buyers but they are inflating(skewing) the numbers. Most first time home buyers are buying properties that are $150K or less. Until the middle range homes, vacation homes and upper end waterfront properties start selling again you are bouncing a deflated ball.

Tom

June 2, 2009 4:11 PM

The National Association of Realtors is completely uncredible when it comes to any real estate forecasts.. I don't know why anyone would bother to quote them as news.. Their mission is to promote real estate sales and they never say anything negative about the real estate market.. The truth is, there is still a glut of homes on the market.. Home owners are still expecting unrealistic prices while buyers are still waiting for prices to continue to dropping, which they will. Sure, maybe "pending home sales" have risen, but only because they have dropped so low, and eventually those who have been waiting are going to buy. But there are still way more people who want to sell than people who want to and are able to buy. And this means only one thing. Prices will continue to drop while the number of houses on the market will continue to rise.

Michael Del Greco, Accurate Inspections, Inc

June 2, 2009 4:59 PM

Tom,

I am 100% in agreement with you statistics and predictions provided by the National Association of Realtors are always as suspect as those provided by the media.

How can anyone at all believe them when they kept predicting the market would rise when it was dropping like a rock?

However I have found my Northern New Jersey home inspection customers lately have been telling me houses in good condition that are priced right are selling quickly and with multiple offers.

While I hesitate to call the bottom of the real estate market is at hand I will venture a guess it is close enough to the bottom to buy if one is in the market for a home.

At the same time I dumped all the stocks I bought in mid March of this year because the stock market is rising at too rapid a pace in too short a period of time.

AnonymousCoward

June 2, 2009 5:07 PM

What a bunch of morons.

Anyone who thinks the northeast has bottomed is an idiot.

gary

June 2, 2009 5:20 PM

we are closing this week on a house in harrison, nj... after a year and 7 months of looking... the prices are great and the mortgage rates were great a few weeks ago. still, the rates are very low. so, if you still have your job, and were looking to buy a house anyway, now is a GREAT TIME! don't wait for prices to drop a few percent more... most of the sellers have already reached their limit; they don't want to see their retirement nest egg drop to nothing. if you include the 8% tax break, NOW IS THE BEST TIME TO BUY A HOUSE IN A LIFETIME!!

gary

June 2, 2009 5:20 PM

we are closing this week on a house in harrison, nj... after a year and 7 months of looking... the prices are great and the mortgage rates were great a few weeks ago. still, the rates are very low. so, if you still have your job, and were looking to buy a house anyway, now is a GREAT TIME! don't wait for prices to drop a few percent more... most of the sellers have already reached their limit; they don't want to see their retirement nest egg drop to nothing. if you include the 8% tax break, NOW IS THE BEST TIME TO BUY A HOUSE IN A LIFETIME!!

dabouv

June 2, 2009 7:39 PM

Housing is still too high in many areas. Eventually you have to get to where the average person can buy the average house will real legitimate financing, not the short terms ARM's or interest only payments. I am in the Portland and I would (am) betting on at least another 10% decline. There are 100's of houses in the mid to upper mid range that I am looking at just in the few neighborhoods I am watching. There are dozens of high end houses that have been sitting for years. The 2007 Street of Dreams houses are on deep discount and 4 of 6 are not sold. Who is going to buy all these 600,000 houses? You need either 183,000 down or will need a jumbo loan at an extra 1.5%. And there is no doubt that interest rates will be going up with all the debt we have taken on. So what will happen when interest adjust to a more normal 7 or 8%? Lower prices, you buy your mortgage. There are much better deals than there have been for sometime but in many markets, prices are going down.

It Depends

June 7, 2009 5:51 PM

We won't know the bottom until we see it in the rear view mirror; however, there are people who need to sell and buy homes, and they are creating the market today. As a seller, hold on as long as you can for your price. As a buyer, walk away from as many places that are too high as you want until you see where the market is. The rest of it is speculation and we should spend our time on more interesting topics than trying to call craps.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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