Versus the month prior, February’s index rose 8 percent but remains well off the highs set last October.

For today’s home buyers and seller, the Pending Home Sales Index is an important measurement. This is because a “pending home” is a property that is under contract to sell, but not yet closed.

According to the National Association of Realtors®, 80% of homes under contract close within 60 days, historically. Therefore, a higher Pending Sales figure in February projects that April’s Existing Home Sales will be higher, too.

If you’re a home buyer today, no doubt you’ve noticed the extra market activity.

On right-priced homes, multiple offer situations are more common; sales prices are settling closer to listing price; Days on market is falling. These are the signs of a buyer-heavy market.  It drives home supplies down and home prices up.

It’s a good time to be a seller, in other words.  Especially as buyer activity looks poised to peak.

When the home buyer credit faced its last expiration in November 2009, we saw a pattern of buyers rushing to beat the deadline.  There’s no reason to expect that won’t happen again. And as it does, Pending Home Sales should continue to climb. Average home sale prices should rise.

Home buyers may find it smart to go under contract sooner rather than later. Pending Home Sales is a warning shot.  Higher home sales figures are ahead.

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It’s the longest winning streak in the index’s history and the highest reading in 2-1/2 years.

It’s also another signal that the housing market is in recovery.

“Pending home sales” are a forward-looking indicator, measuring the number homes under contract to sell, but not yet closed.

Historically, 80% of homes under contract close within 60 days.  Most others close within 120 days.

It’s no wonder home values are rising in so many markets.

Home buyers — take note.  If you’re plan to purchase a home between now and the New Year, expect that the recent run in pending sales will turn into run of closed sales which, in turn, should pump prices up and drop home inventory.

With mortgage rates hovering near 4-month lows, the best way to find a value in housing may be to act sooner rather than later.

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As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 6th consecutive monthly gain in July.

After a meteoric rise that started in January, the index is now at its highest levels in more than 2 years.

A “pending home sale” is a home that is under contract to sell, but not yet closed.  It’s not the same as an actual home sold, but data shows that nearly 80% of homes under contract close within 2 months and many more close in months 3 and 4.

Home buyers — take note.  When the Pending Home Sales Index is rising, it means that market activity has picked up.  This can lead to any one, or a combination, of the following:

1. Multiple-offer situations
2. Reduced negotiation leverage over sellers
3. Higher home sale prices with fewer concessions

So, consider yourself alerted.  If you’re buying a home in the next several months, expect the recent run in Pending Sales to lead to a run in closed sales, too.  That should lead home prices higher in most markets.

Indeed, we’re already seeing it.  Case-Shiller says prices are on the upswing.

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It’s the Pending Home Sales Index’s longest winning streak since 2003 and another piece of evidence that the housing market may be rebounding.

• The supply of new homes is falling
• The supply of existing homes is falling
• The Case-Shiller Index showed home value increases in many of its markets

Separately, the data is interesting. All together, it paints the portrait of a recovery.

That said, we can’t forget that the Pending Home Sales Index is somewhat unique versus other real estate reports.  Whereas data on existing and new home sales measures closed transactions, the Pending Home Sales Index only measures intent to buy.

Just because a home goes under contract, in other words, doesn’t mean that it actually will sell.

Purchase transactions can fall apart for a multitude of reasons including, but not limited to, buyer-seller disputes, failed home inspections, and an inability to secure mortgage financing.  The Pending Home Sales Index doesn’t account for these types of issues.

In general, though, as the number of homes under contract increases, Existing Home Sales increase, too — usually on a 2-month lag.  Home sale data should remain strong through early-Fall, at least.

For active home buyers, be conscious of the fact that that more home sales plus falling home supplies leads to higher home values.  If you’re looking for a bargain, the longer you wait, the less likely you may be to find it.

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•    Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s downpayment required for eligibility for FHA insurance may not consist of any funds (including funds derived from a sale of the homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity).  Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs.  – U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

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This week we saw the economy shed 539,000 jobs in April, raising the 6-month total to nearly 4 million jobs lost.

And while the April data may look bad, it’s actually 10% better than what was expected.

Now, it may seem odd to categorize 539-thousand lost jobs as “good-for-the-economy”, but it’s important to remember that on Wall Street, expectations are everything.

As it turns out — relative — the actual job loss data wasn’t so bad.

Now, markets are making adjustments and re-forming expectations of what’s ahead for the economy.  They’re preparing for things like higher levels of consumer spending in the months ahead, and fewer home foreclosures nationwide.  Both outcomes would help to spur the economy from recession.

Other economic data included the second consecutive month, the number of homes under contract to sell increased — further evidence that housing markets may have already bottomed.

As reported by an industry trade association, the Pending Home Sales Index rose by 3-plus percent last month.

A “pending” home is one that’s under contract but has yet to close.  This is one reason why the Pending Home Sales Index is an imperfect statistic.

Just because a home is under contract doesn’t mean it will actually sell.  A lot can go wrong between the date of agreement and the date of closing.  Deals fall apart all the time.  But, when the number of pending contracts rises, we can infer that buy-side demand for homes is strong.

It’s likely that the number of homes under contract is being influenced by a combination of low mortgage rates, relatively inexpensive homes, and various tax credits for certain homebuyers.  Overall, it’s spurring demand and that’s part of what’s captured by the Pending Home Sales Index.

So long as the demand for homes outpaces its supply, home prices are expected to rise.

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mortgage-rates-april-24-09

home sitting on the market.  One would hope the Monetary and Fiscal policy will eventually lead us to equilibrium and a stable economy and housing market.

Friday’s better than expected New Home Sales number (337K estimated 356K actual). The positive number could be the first chute to sprout for this spring recovery.

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Overall rates remain low for the time being, thanks to the FEDs Subsidy Suppression program.  The FED continued its weekly protocol purchase of Agency Mortgage-Backed Securities Purchase Program.

Gross purchases from April 9 through April 15: $30,400 million
Net purchases from April 9 through April 15: $21,750 million

With respect to housing data, news is rarely positive or negative on a universal level. There’s always two perspectives to consider, after all.

1. The home buyer’s perspective
2. The home seller’s perspective

Usually, when data is beneficial to one group, it’s less beneficial to the other.  This is true for rising home prices, average days on market and so forth.

Today, the group that gets the most benefit from data is the home seller group.

Published Thursday, a government report showed that Housing Starts fell 11 percent nationwide in March and also fell short of analyst expectations.  A “Housing Start” is a new housing unit on which construction has started.

The press is calling this a stumbling block for the economy, but that’s not exactly true.

Fewer Housing Starts last month means that fewer new homes will come on the market later this year.  This is not necessarily bad news.  Especially if you’re planning to sell your home in the latter half of the year.  With fewer homes for sale, the supply-and-demand curve should shift in favor of home sellers.  This helps stabilize home prices at a time when they might otherwise be prone to fall.

If it’s true that stable housing markets are key in an economic recovery, then fewer Housing Starts is actually a push in the right direction.

But there’s more to the story (as always).

As footnoted in the Commerce Department‘s report, a statistical disclaimer states that the Housing Starts data’s Margin of Error was so high that the report’s conclusion is just a guess.  Technically, the entire report is invalid anyway

So, the government won’t issue its final March 2009 Housing Starts data for months, but if the initial figures stick, home sellers may be in position to command higher sale prices later this year to the detriment of home buyers.  It’s basic economics.

And from a home seller’s perspective, that news is good.

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Tuesday, we’ll get a look at Retail Sales.  Because consumer spending accounts for two-thirds of the economy, a lower-than-expected figure for Retail Sales would dampen Wall Street’s current optimism for the U.S. and that would likely lead mortgage rates lower.

Next, on Wednesday, the government will release a closely-watched ”cost of living” measurement called the Consumer Price Index.  At its roots, CPI is an inflation gauge for the economy so — because inflation is bad for mortgage rates — a higher-than-expected CPI number is expected to push mortgage rates higher.

Then, on Thursday, Housing Starts is released.

Housing Starts measures the number of new homes on which the nation’s builders broke ground last month.  If starts are up, it may mean that builders are optimistic for housing — a good sign for the economy.  However, if starts are down, it should help reduce housing inventory over the next few months — also a good sign for the economy.

Meanwhile, 3 of the country’s biggest financial firms — Goldman Sachs, JPMorgan Chase, and Citigroup– are due to release first quarter earnings this week.  If the filings show strength like Wells Fargo’s did, expect mortgage rates to rise like that did after the Wells Fargo report.  What’s good for stocks right now may prove to be bad for mortgage rates.

Goldman Sachs reports on Tuesday, JPMorgan Chase on Thursday and Citigroup on Friday.

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In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren’t uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed.

As a loan professional, I make a point to follow the appropriate guidelines at all times. This promotes a good relationship with the lender, and helps to create easier and much smoother closings for my borrowers.

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