Fall In Home Prices Boost Sales

Fast-dropping interest rates and the most affordable homes in more than three decades helped prop up the staggering residential real estate market in December, according to a report released Tuesday.

The pending home sales index increased 6.3 percent to 87.7 in December, the first gain since August, according to the National Association of Realtors. The December figure is also 2.1 percent higher than the same month in 2007.

The closely watched index is a forward-looking indicator based on contracts signed in December -- or basically the number of home sales in process. The West region had a mixed report with the index declining 3.7 percent to 97.5, but was 17.5 percent better than December 2007.

“The monthly gain in pending home sales spurred by buyers responding to lower home prices and mortgage interest rates more than offset an index decline in the previous month,” NAR chief economist Lawrence Yun said in a news release. “The biggest gains were in areas with the biggest improvements in affordability.”

The NAR’s Housing Affordability Index increased 10.9 percent to 158.8, the highest since the index started in 1970.

“Significant uncertainty still clouds the housing market despite improved affordability conditions,” Yun said. “For a sustainable housing market recovery and, hence, sustainable economic recovery, we need a significant housing stimulus and mortgage availability for qualified buyers.”

February 3, 2009

San Francisco Business Times