Is it the end of the housing crisis?

The National Association of Realtors released a report on June 9th, 2008 stating that pending home sales in April 2008 increased nationwide by 6.3 percent from March 2008, defying the prediction that the index would remain steady. This is the biggest one-month gain since 2002, interrupting a 5-month streak of declines. The National Association of Realtors’ seasonally adjusted index of pending sales for existing homes rose to 88.2, from a March reading of 83.0, the lowest since the index was started in 2001. It was still 13 percent below April 2007’s reading of 101.5. A reading of 100 indicates the average sales activity in the year 2001.

According to Prudential Fox & Roach’s HomExpert Pending Home Sales Index, the number of pending home sales rose 2.6 percent in the Greater Philadelphia area in April from which is the first Pennsylvania increase in the index since December. The HomExpert Pending Home Sales index covers figures in southeastern Pennsylvania, South Jersey and northern Delaware, and is based on contracts signed in a month and tracks pending sales of homes reported to the Trend Multiple Listing Service, the region’s primary real estate reporting tool. The index reported a rate of 92.1 in April 2007. The April 2008 index was 72.8, compared to the February 2008 index of 70.9. That means that the index has fallen 21.2 percent since this time last year.

Pending home sales in the Delaware area are down 23.2 percent. The Prudential Fox & Roach data stated that “compared to findings reported by the National Association of Realtors pending home sales index, real estate activity in the Greater Philadelphia region fared better than in the Northeast region, but fell below the national as a whole.” The southeastern Pennsylvania index is down 21.2 percent from a year ago, South Jersey decreased by18.9 percent, and the Delaware area fell 23.2 percent below last year’s index.

Global Insight economist Patrick Newport states of the increase that “it’s good news, but I’m not jumping for joy because I’m not convinced that it’s telling us things are picking up. It’s telling me that banks are dumping properties at fire sale prices, spurring home sales.” Buyer interest is starting to meet supply, as many buyers are taking advantage of distressed homes by accepting their 20% discounts. This may account, in large part, for the recent surge in the real estate market. Real estate companies across the country report receiving up to 70 offers on properties under $250,000, where as the common number is usually 10.

However, real estate inventory still remains at record highs, with the majority of sales going to foreclosures and short sales. This news is not likely to mark the end of the housing downturn. Experts still believe there is a long way to go.

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