" " " Maine's Waterfront Real Estate News: June 2009

Tuesday, June 2, 2009

Maine a Leader in Home Sales Recovery

Northeast home sales are poised for a big spring bounce

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.

Pending Home Sales Rise for 3rd Straight Month

By Phil Mintz

Contracts signed show a big jump, especially in the Northeast, another indicator the market may be bottoming.

Low interest rates and an $8,000 tax credit for first-time home buyers helped push pending home sales up for the third month in a row, another indication that the decline in the real estate market may be stabilizing, the National Association of Realtors reported on June 2.

The group's Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7%, to 90.3 from a reading of 84.6 in March, and is 3.2% above April 2008, when it was 87.5, the group said. Economists surveyed by Thomson Reuters (TRI) had expected the index would edge up to 85 from a reading of 84.6 in March. It was the biggest monthly jump since October 2001.

Pending home sales activity was greatest in the Northeast, where the index increased 32.6%, to 78.9, in April, 0.8% above a year ago. The only region that showed a decrease was the South, where the index declined 0.2%, to 93.0, 3.5% higher than a year ago. In the Midwest the index rose 9.8%, to 90.4, and is 11.1% above April 2008. In the West the index rose 1.8%, to 94.8, but is 2.9% below a year ago.
Very Favorable Conditions

Lawrence Yun, the group's chief economist, said buyers are responding to very favorable market conditions, and while the total number of existing-home sales is expected to improve, there will be sharp local variations. "The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline," Yun said in a news release.

Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing-home sales.

Paul Dales, U.S. economist for Capital Economics in Toronto, said in a report that if the April increase in pending home sales is reflected fully in existing-home sales numbers, it would bring them to an annual rate of 5.1 million, a level last seen before the collapse of Lehman Brothers in September.

"The pending home sales index has now improved for three months in a row, adding to the evidence that housing activity is finding a floor," Dales wrote. Nevertheless, even if existing-home sales were to rise to 5.1 million, they would still be 30% below their peak. Accordingly, even if activity is finding a floor, it is at staggeringly low levels."

The Associated Press contributed to this report.

Mintz is news editor for BusinessWeek.com in New York.