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REALTOR®: Realtors See Good Signs for Housing Market with Rise in Pending Sales and Extension of Higher Loan Limits

Wednesday, November 4, 2009

For the eighth consecutive month, pending home sales rose again in September, the National Association REALTORS® reported last week. NAR officials attribute the rise in the index, a forward looking indicator based on contracts signed in September, to momentum from first-tie home buyers seeking to take advantage of the federal first-time home buyer credit, which expires at the end of this month.

The Pending Home Sales Index in September rose 6.1 percent to 110.1 from a reading of 103.8 in August. The index is 21.2 percent higher than September 2008. The index is at the highest level since December 2006, when it was 112.8.

"What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," Lawrence Yun, NAR chief economist, explained the rise.

NAR estimates approximately three million renters are now financially well-qualified to buy a median-priced home. "As long as buyers do not overstretch and stay well within their budget, a sizable pent-up demand can be tapped among financially qualified potential buyers," Yun said. "Although the tax credit is greatly reviving the existing home market, new-home sales may continue to struggle as home builders hold back production to drive down inventory. In addition, there remains an ongoing credit crunch for construction loans."

The Pending Home Sales Index rose from August 8.1 percent in the Midwest, 4.9 percent in the South, and 10.2 in the West. It slipped 2 percent in the Northeast. Compared with the same period last year, the index increased in all regions by 16.9 percent in the Northwest, 17.8 percent in the Midwest, 22.8 percent in the South and 23.7 percent in the West.

Real estate experts have said success of a recovery in the housing market hinges on the availability of financing, especially in the high-end market. Early this week, the Silicon Valley Association of REALTORS® welcomed the passage of a congressional resolution extending through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including many in California.

A provision of the Housing and Economic Recovery Act of 2008 included temporarily raising the conforming loan limits from $625,500 in high-cost areas to $729,750 and extending the limits through 2009. The recent actions of Congress effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.

"The higher loan limits and the federal tax credit for first-time home buyers have helped stabilize California's housing market over the last year," said Keady. "REALTORS® have urged Congress for their continuation."

According to a California Association of REALTORS® survey, 39 percent of REALTORS® who worked with first-time home buyers reported their buyers would not have purchased a home if the tax credit had not been available.

Legislation to extend the tax credit for first-time home buyers until April 30, 2010 and also offer a reduced credit of up to $6,500 to some repeat buyers who have owned their current homes for at least five years is expected to pass the Senate this week. After the Senate action, the bill has to go to the House of Representatives for its approval.

"Extending higher loan limits and the extension and expansion of the federal homebuyer tax credit would continue the momentum in the market and hopefully lead us to a complete recovery," said Keady.


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.

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