The National Association of REALTORS® (NAR) recently reported the Pending Home Sales Index, based on contracts signed in May, rose in the West and Northeast, but fell in the Midwest and South. The national index stood at 97.7 in May, down 3.5 percent from the previous month and down more than 13 percent from last year's level.
NAR officials said the index of pending home sales shows existing-home sales may ease, but should stay fairly close to present levels in the months ahead.
NAR Senior Economist Lawrence Yun explained housing activity continues to be affected by tighter lending standards following rising foreclosures in the subprime mortgage area and a lack of buyer confidence.
"Some transactions are being postponed from mortgage market disruptions," Yun said. "But better supervised lending will put housing in a fundamentally healthier state over the long term.
"Mortgage purchase applications are trending up, with some of the rise due to buyers reapplying for alternatives to subprime financing. Nonetheless, home sales should stay close to present levels in the months ahead given an accumulating pent-up demand," Yun added.
The pent-up demand results from slow household formation, which is significantly below levels that would be expected in a period of job creation and economic growth. "As consumer confidence improves, home sales will rise," he predicted.
The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index of pending sales rose 5.6 percent in the West and 3.8 percent in the Northeast in May. The index fell 7.6 percent in the South and was down 8.9 percent in the Midwest.
There continues to be much activity in Silicon Valley's housing market, according to Silicon Valley Association of REALTORS® (SILVAR) President Mark Burns.
"Silicon Valley appears insulated from the housing downturn some areas are experiencing," explained Burns. "As long as demand for homes is greater than the supply, property here will continue to increase in value. A large majority of factors such as location, a healthy economy and good schools, point to good long-term growth in Silicon Valley and that is why we remain almost unaffected in our area by foreclosure rates, slower sales in some areas, and the subprime mortgage problems more prevalent in other parts of the country and California."
Like Yun, Burns, who is a Realtor with Coldwell Banker, attributed some decline in sales partially to stricter lending standards due to subprime mortgage problems and increase in foreclosures, but he noted that the stricter lending requirements allow for a healthier and more stable housing market.
"There are still people out there who can qualify for good loans, but you have to have a good credit rating. With low mortgage interest rates and a healthy job market, it's still a good time to buy a home in Silicon Valley," said Burns.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.