April showers bring may flowers and boost pending home sales
Home sales and similar statistics regarding home sales have not been encouraging for months, but are showing signs of life. Pending home sales, or contracts to buy homes, were observed during the month of March, as spring is certainly the buying season. However, that still doesn’t mean that all is well yet.
Mortgage rates dip but more people sign the dotted line
The national average rate on mortgages took a slight dip recently despite it being the busiest time of the year for real estate, according to USA Today. Freddie Mac noted that average rates on a 30-year fixed mortgage dropped 0.2 percent over the previous week, and the 15-year fixed dropped 0.5 percent during the same period. Interest rates for 30-year fixed rate mortgages have steadily held under 5 percent for months and 15-year loans have similarly held at or around 4 percent. However, pending home sales, or contracts entered into for the purchase of a home, rose by 5.1 percent during the month of March. Analysts were expecting a rise closer to 1.5 percent, according to Bloomberg.
Wait to break out the champagne
Though there are signs of life and pending home sales did beat estimates, this does not mean that it is time to break out the bubbly and toast the end of recession. Pending home sales for March 2011 are 11.5 percent lower than for March 2010. Existing home sales also increased in March, according to CNN, increasing by 3.7 percent from the end of February. However, existing home sales for March 2011 are down 6.3 percent from March of 2010. Lawrence Yun, chief economist for the National Association of Realtors, credits the uptick as being “organic recovery,” or the market working on its own. That said, Yun expects the housing market to take until 2012 to return to pre-2008 conditions. The housing market still faces some challenges.
Job security and credit availability in the way
Part of the problem facing the real estate industry, tipped as being the single biggest factor holding back economic recovery, is both feelings of financial instability and tightening credit standards. High unemployment makes people feel less apt toward buying homes, but that is slowly starting to resolve. Credit standards are definitely tighter than in the past, though. Freddie Mac, according to the National Association of Realtors, noted that the average credit score needed to secure a mortgage had risen from 720 in 2007 to 760. The average credit score needed for a Veterans Administration or Federal Housing Administration loan rose in the same period from 630 to 700. Lawrence Yun has been quoted numerous times as saying that loosening up lending requirements would speed up sales dramatically.