photo credit: Images_of_Money
At the end of July, there were more people who signed contracts to purchase real estate for the second month in a row. However, this rise is not quite enough to foreshadow a recovery in the housing market. The National Association of Realtors said that the index of purchase agreements for previously-occupied houses grey 2.4 percent in June, ending at a reading of 90.9. An index reading of 100 is considered by economists to be "healthy." The housing market hadnt reached a level that good since April 2010, which was the last month for the first-time homebuyers tax credit. Since theres usually a one-to-two-month interval between when a contract is signed and when its closed, contract signings are usually quite a reliable gauge of where the market is headed. It is incredibly important, however, to remember that a sale is never final until the closing has occurred. NAR says that its more and more commonplace for a buyer to back out of a contract after the appraisal has proven that the home is worth less than the current purchase price.
Home prices are the lowest theyve been in some time, but that and low mortgage rates arent doing much to increase sales activity. Economists argue that it still could be many years before we see a true recovery. Chief U.S. economist at MFR Inc., Joshua Shapiro says, "In absolute terms this is a very depressed level, and with prices in most areas either still declining or flat, there is little incentive for buyers to be aggressive." Although we had growth in contract signings in May and June of this year, it still doesnt make up for a huge decline in April when contract signings had declined 11.3 percent.
Previously-owned home sales dropped for the third straight month in June and are way behind 2010s sales pace when home sales numbered 4.91 million the least number sold since 1997. If we were truly in a healthy and recovered economy, we would be seeing about six million existing home sales per year. The Standard & Poors/Case-Schiller home-price index that was released July 26th demonstrated that out of the 20 cities covered, 16 of them had increases in the non-seasonally adjusted prices mostly due to a flood of spring buyers. The index reports that seasonally-adjusted prices have decreased 1.2 percent over the last six months approximately one-third of the drop from the six months previous.
One reason for this could be that there are thousands upon thousands of foreclosures hanging in limbo most waiting for the results of a government-run investigation into lenders shoddy paperwork. It is expected that once the investigation is concluded, banks will start seizing more homes, forcing home prices to drop again. Economists argue that the increase in unemployment coupled with doubts over the foreclosure process could create more price drops in the second part of the year. Analysts say prices will drop another five to ten percent by the end of 2011.
