Pending U.S. Home Sales Rise
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For the third month in a row, U.S. pending home sales are on the rise. April saw an increase in pending sales as low mortgage rates and government incentives continued to fuel buying. Even with pending U.S. home sales on the rise, though, home prices continue to fall. And until home prices stop falling, a true housing market recovery is a long way off. MarketWatch reports on current mixed results in the housing market:
“This is yet another positive indication that the bottoming process is forming” in home sales, wrote Jennifer Lee, an economist for BMO Capital Markets. “Now if only prices would stabilize.”
One of the problems is that housing prices will probably not stabilize until after the tide of foreclosures ebbs somewhat. Even though pending home sales are on the rise, inventory continues to rise as well. With foreclosures picking up again in Quarter 1 of 2009, homes remain on the market, even with an increase in buyers.
Another issue is that even with home sales pending, there are a number of things that can go wrong before the deal closes. In some cases, potential buyers have lost their financing prior to closing. Mortgage lenders are choosing to review applications midway through the process, and if any red flags show up, the whole deal could be called off. Once a sale is pending, it does not follow that it will automatically become a true sale.
Home sales are up, though, even though some pending sales fall through. This is an encouraging sign. However, prices do continue to drop. A recovery in the housing market is not likely to begin until prices stop falling and home sales increase. Both things must happen in order for an adequate recovery to begin in the housing market — one that could help lead the wider economy out of this recession and toward recovery.
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