Surge in Pending Home Sales Continues Thanks to Home Buyer Tax Credit Approaching Deadline
According to a NAR article released yesterday, the surge in pending home sales continues. "Pending home sales have risen for three consecutive months," NAR stated, "reflecting the broad impact of the home buyer tax credit and favorable housing affordability conditions, according to the NATIONAL ASSOCIATION OF REALTORS®."
The Pending Home Sales Index is a data point that measures homes under contract (not closings), but what it does is help forecasters see how closing numbers may look in the coming months (usually the closing will occur in one to two months).
The surge in pending home sales is mostly related to the home buyer tax credit, which expires at the end of this month. We saw a similar surge right before the program was originally scheduled to expire.
Lawrence Yun, NAR chief economist, said that this second round of surging sales from the tax credit extension looks as strong as the original tax credit. “There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension. But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales,” he said.
The only thing to worry about now is that time just might not be on these prospective new homeowners' side. Many of these pending sales are on short sale or foreclosure properties, and unfortunately those properties have historically taken longer to close, due to extra time required for the bank approval process and other related steps unique to closings on these types of properties.
According to Yun, "There could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems meeting the settlement deadline by June 30. Because of these market challenges, NAR has asked Congress to provide flexibility on the deadline for closing."