The January Pending Home Sales Index fell 7.7 % from December, 6.4% below January ‘08,  the lowest level since 2001.  In the Northeast the index dropped 12.7 % in January, 19.7 percent below a year ago. Lawrence Yun, NAR chief economist, said “We expect soft home sales in the near term, but buyers are expected to respond to improved affordability conditions and from the $8,000 first-time buyer tax credit.” In December, the pending home sales index rose 4.8%, compared with a prior estimate of a 6.3% gain. The index is based on signed sales contracts, which usually occur a month or two before the sale is closed, when sales are reported in the NAR’s existing-home sales report.

Ironically, sales are down as affordability is increasing. NAR’s  Housing Affordability Index rose 13.6 % in January, a new record high. The HAI shows that the relationship between home prices, mortgage interest rates and income is the most favorable since 1970. The index shows a family earning $59,800 could afford a home costing $283,400 in January with 20% down, assuming 25% of income is devoted to mortgage principal and interest.  A year ago, the typical family could afford a home costing $263,300.

 

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Tags: Housing Affordability Index, Lawrence Yun, Pending Home Sales Index

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