Purchase incentives

The National Association of Realtors (NAR) has reported that pending home sales slowed a bit in August, but contract signings (pending sales) still are at their second-highest level since January of this year. All major regions across the country, with the exception of the West, experienced decreases in home sales.

Across the nation the Pending Home Sales Index (which is an indicator that is based on contract signings) dipped 1% in August when compared to July and is 2.2% less than in August 2013. To keep this decrease in context, the index is still above 100, which is the average level of contract activity for the fourth straight month and is at the second-highest level since this time last year.

Meanwhile, the August Pending Home Sales Index (PHSI) in the Northeast dipped 3%, in the Midwest it decreased 2.1%, in the South it decreased 1.4%, and in the West it increased 2.6%.

The modest decrease in pending home sales is attributed to fewer distressed properties (short sales and foreclosures), according to NAR’s chief economist, Lawrence Yun. Mr. Yun said, however, that contract signings are steady.

He continued to state that fewer distressed homes at depressed prices and the realization that interest rates will rise caused investors to hesitate in August.

The market is returning to traditional and first-time buyers who require a mortgage to purchase a home. NAR research indicates that 81% of first-time home buyers last year financed their purchase with a conventional or FHA loan (42% received a conventional loan and 39% received financing through an FHA loan). First-time home buyers have represented less than a third of all buyers each month since 2012.

The key to the increasing ability for first-time buyers to purchase a home is employment. Mr. Yun contends that employment and income gains will enable the repayment of student loans and improve the eligibility of first-time buyers to secure mortgages. Industry analysts believe existing-home sales are expected to be stronger in the second half of this year after more inventory becomes available.

Industry analysts also forecast that the average 30-year fixed-rate mortgage will reach 5% by mid-2015 due in part to the Federal Reserve’s planned withdrawal from buying mortgage-backed securities.

This is still low by historical standards. A 1% increase in interest rates could raise monthly mortgage payments on a typical home next year in expensive areas by slightly more than $700 (in the San Jose/Silicon Valley region) and as little as $65 in more affordable areas (such as the St. Louis area).

In the New York metropolitan area, which includes northern New Jersey, Long Island and Westchester, monthly payments are estimated to increase by about $200, according to Zillow.

While an increase in interest rates may be of concern, home prices have remained relatively affordable.

In Greenwich, the median sales price of single-family homes has increased 12% since last year (these figures are year to date or January through August), and the median sales price for condominiums increased 8% since the last year (year to date or January through August), according to the Greenwich MLS.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 189-191 Mason Street in Greenwich. Questions or comments may be emailed to [email protected]

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