Crunching the recent Pending Homes Sales Index (PHSI) numbers revealed the home buyer credit extension worked. The extension proved not to have diminishing returns as the index nearly matched the recent high set in October, 2009 (110.9 vs. 112.4). This is short term good news for the economy as the extensions have helped the real estate market find a bottom just as foreclosures are 6 months out from peaking.
The Pending Home Sales Index (National vs. Regions):
Looking at the data for each region, the story shows a sharp increase in the Northwest in April vs. the South (the only region where the number actually decreased). The South showed a big increase a month earlier. The South seems to be picking up overall (eclipsing October more than any other region). The West is the only region showing substantially less pending home sales than October.
Many thought the extension would indeed have diminishing returns and it probably did somewhat as the housing crisis is another 6 months in the rearview mirror than it was in October. Each month that goes by, the media seems to be mentioning it less, which certainly has some impact on consumer confidence.
I pulled the number of news articles on Google showing mentions of the “housing crisis” and found that it’s dropping significantly. The number of articles also dropped significantly for “foreclosures” despite the peak coming in or around December of this year.
News Articles Referring to "Housing Crisis" (via Google)
News Articles Referring to "Foreclosures" (via Google)
My theory here is people (and the media) are honestly tired of these subjects and are mentally moving on. This is translating somewhat into the Pending Home Sales Index as although it is seasonally adjusted, I’m not sure how it could be adjusted for confidence. Confidence is returning somewhat in the real estate market due to property prices looking unbelievably low.
What’s next?
Thinking out for the remainder of the year, we can expect a pretty steep drop in PHSI over the next month if you consider the recent news by the Mortgage Banker Association showing the lowest number of applications submitted since 1997. The owner-occupants are certainly taking a post-tax credit break.
The question in my mind is; will the investors (YOU) step back in and fill the void they did when the crisis first started?
Related posts:
- How Can Real Estate Investors Profit from the Home Buyers Tax Credit Extension?
- Why the Home Buyer Tax Credit Won’t Be Extended
- Home Buyer Tax Credit Is Dead – Long Live the Tax Credit!
- Should the Home Buyer Tax Credit Deadline be Extended?
- First Time Home Buyer Tax Credit needs one of those Modifications
Article Author: Ryan HinricherRyan has written 78 articles for us.
Visit Ryan's Website: http://www.investornation.com
Ryan Hinricher is a Real Estate Entrepreneur, Blogger, Change Advocate and Founder of Investor Nation, a concierge realty and real estate investment company focused on the needs of the residential investment home community.
Joshua Dorkin
{ 2 comments… read them below or add one }
Ryan,
Good stuff. As a numbers guy I love these graphs and charts.
While I agree that home buyers are taking a break after the frenzy leading up to April 30th, there are still signs that well priced, quality properties are going under contract. Overall that is good news.
As for investors, the next 6 – 9 months will still present plenty of opportunities… I would just caution investors to be conservative with their offers and brutal in the execution of their renovations.
Pete
Great article and informative chart!
I also agree that overall, this is a good news to everyone especially for those first time home buyer. Although the income limitations have been increased to $125,000 for single filers and $225,000 for joint filers. Also the purchase price of the home must be less than $800,000 and the estimated loss in tax revenue to the government comes to $10.8 billion.
Jeff