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June Pending Home Sales Edge Down with End of Tax Credit Incentive

Wednesday, August 4, 2010

The National Association of REALTORS® reports the number of contracts to purchase existing homes nationwide fell in June, largely due to the expiration of the federal home buyer tax credit which helped spur sales the past year.

 The Pending Home Sales Indexdeclined 2.6 percent from May, and was 18.6 percent below the June 2009 figure. The index is a forward-looking figure which reflects contracts and not closings, which normally occur with a lag time of one or two months.

In June, the PHSI in the Northeast dropped 12.2 percent from May and was 25.4 percent lower than June 2009. In the Midwest the index fell 9.5 percent and was 27.8 percent lower than a year ago. Pending home sales index the South rose 3.7 percent from May, but was 13.3 percent below June 2009. In the West the June index slipped 0.2 percent from the prior month, but was 14.2 percent below a year ago.

 With the end of the federal home buyer tax credit and with consumer confidence still down due to job worries, lower home sales are expected in the short term, explained the Realtor group's chief economist Lawrence Yun. "There could be a couple of additional months of slow home sales activity before picking up later in the year, provided the job market continues to improve," he said. "Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn't likely to be any meaningful change to national home values. Some local markets continue to show strengthening prices."

 Yun expects mortgage interests to remain historically low for the rest of the year with "very modest growth" in employment. He described the lull in sales as an expected "pausing situation," and noted job creation is essential to boosting consumer confidence and home sales.

 "We really need to see stronger job creation to have a meaningful recovery in the housing markets," he added.

 Jeff Bell, president of the Silicon Valley Association of REALTORS® , stressed market conditions vary, depending on location. "We expected the sales pace to slow with the end of the federal home buyer tax credit, but so far, the local picture appears healthy," Bell said.

 Bell indicated sales on the high-end market have picked up with lower mortgage interest rates and the loosening of the jumbo market.

 "With home prices still substantially below their peaks and interest rates at historic lows, it's still a very affordable time to purchase a home," Bell said.

 Bell also stressed job creation is key to a sustainable housing recovery. "We're seeing more jobs in Silicon Valley, but it may take a while before we get back to the levels we were at before the economic downturn."


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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