According to the National Association of Realtors (NAR), the Pending Home Sales Index (a forward looking indicator) rose 5.2% to 79.4 based on contracts signed in July 2010. The June 2010 index came in a 75.5. However, the July 2010 index is still 19.1% below July 2009. This data reflects contracts and not closed sales, which normally occur with a lag time of one or two months.
Lawrence Yun, chief economist for NAR, cautioned that there would be a long recovery process. Yun believes that improved affordability conditions should help with the recovery, but those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, may have to wait almost a decade to fully recover lost equity.
I do not see the Philadelphia area as one of the “bubble” markets. California, Nevada, Florida, and Arizona are prime examples of areas that had an artificially high peak.
Yun also thinks that affordability could reach a generational high in the second half of this year because of rock bottom mortgage rates and the Fed’s very accomodative monetary policy. Loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.
Affordability should help to get homes on the market sold, but it appears that pricing will remain at their current levels for the remainder of 2010.