The Pending Home Sales Index moved higher in March as home sales were spurred by low mortgage rates and an expiring tax credit.
A “pending home sale” is a property that is under contract to sell, but not yet closed. The tax credit allows closings to take place anytime prior to the end of July.
March marks the second straight month in which the Pending Home Sales Index improved after a series of weak showings this past winter.
March showed a 5.3% increase over the month, but the Pending Home Sales Index is still off its October 2009’s peak. October 2009 is a comparable period to March 2010 in that it marked the 1-month deadline before the home buyer tax credit’s planned expiration date. The credit was later extended to April.
Home buyers and Memphis real estate buyers no doubt noticed the change in activity. Throughout the US, multiple offer situations were more common last month and homes priced to sell moved very quickly. We specifically noticed this as many investors lost out to owner occupants looking to cash in on the tax credit.
The increase in March’s Pending Home Sales is diminishing the nation’s home supply which, in turn, should cause prices to rise (even if temporarily) in most markets — including Memphis.
The sales resulting from the tax credit will likely create additional support for home prices. Even if prices dip in the fall or winter due to bank liquidations, any additional leg down in home prices will likely be minor.
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