The housing scenario shows no signs of improving.The data for pending home sales released Tuesday , show a new low for the month of February. The National Association of Realtor's index for pending sales of previously owned homes fell 1.9% to 84.6 in February from January, a spokesman of the industry group reported.The figure is worse than the 1.1% drop predicted by analysts.
However the worst seems to be over. NAR's chief economist, Lawrence Yun, expects existing home sales to start showing a steady increase within a few months. 'We're looking for essentially stable sales in the near term. before higher mortgage loan limits translate into more sales in higher cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent up demand begins to be met.' A home sale is listed as pending when the contract has been signed but the transaction hasn't closed. This process takes a month or two after signing.
The scenario outlined by Yun is not unlikely. Not only is credit becoming easier to get, prices are expected to hit a trough soon. Fears of job losses will also recede once the economy starts picking up. Once this happens people who had postponed purchasing a home, waiting for prices to fall further, will enter the market, causing a fairly sharp rebound in sales.
This view is supported by former Fed Reserve Chairman Alan Greenspan who says that the drop in US home prices will probably end well before next year as the number of houses on the market diminishes, aiding an economic rebound. 'It will not be until early 2009 that we will get close to having eliminated this home inventory. But it is very likely that home prices will stabilize well before that,' he said.