While the Dow Jones index dropped a record fourteen hundred points in a matter of days, the latest pending home sales index was moving in the opposite direction — up strongly to its highest level in more than a year.
Pending sales jumped by 7.4 percent in the latest month, according to the National Association of Realtors.
Financial industry analysts had forecast a one and a half point DECLINE in the index for the month, but pent-up demand for housing, plus rock bottom bargain prices in many markets, convinced buyers that this is a good time to get off the sidelines and get into the game.
The pending home sales index measures new contracts for home purchases that haven’t yet closed, but should do so in the near future. It’s a widely accepted predictor of sales activity two to three months down the road.
Mortgage rates and new loan applications also defied the negative spiral in the stock market: Applications for home purchases to be financed with conventional mortgages jumped by three percent last week, and new FHA applications were up by nearly 10 percent, according to the Mortgage Bankers Association’s national survey.
The main reason for this sharp divergence is that real estate has been undergoing its own correction on pricing and underwriting practices for the past two and a half years.
It’s already taken a beating and has now reached a point where prices in former boom markets are so affordable that smart buyers are swooping in.
Also – although I keep hearing about the global credit squeeze and banks’ unwillingness to lend money, that’s definitely NOT the case in the mortgage market. There’s plenty of money available – as long as you have a solid credit history and some down payment cash.
Feel free to contact me if you have any real estate or mortgage questions.