Signed contracts to purchase homes rose in November, the fourth increase in five months. That should give the housing market a boost in the first few months of 2011 because there’s usually a one- to two-month lag between a sales contract and a completed deal.
Economists caution that a big reason for the increase is that people are buying foreclosed homes, which sell at steep discounts and weigh on the market.
Another obstacle is a sudden spike in the 30-year fixed mortgage rate, which only weeks ago had fallen a 40-year low.
Still, many economists expect sales to gradually rise as the economy adds jobs and home prices stabilize.
“Sales appear to be picking up, and we expect better sales in the next several months,’’ said Patrick Newport, a housing economist at IHS Global Insight. “A lot of that is because the job market is improving.’’
The National Association of Realtors said yesterday that its index of sales agreements for previously occupied homes increased 3.5 percent last month from a downwardly revised reading in October. Contract signings were up in the West and Northeast, but down in the South and Midwest.
A reading of 100 indicates the average level of sales activity in 2001, when the index started. It was above that level during the boom years, sank during the recession, and surged temporarily when the government offered tax incentives to spur sales. When the credits expired in April, the index sank again.
Completed home sales — which the realtors group measures in a separate report — are expected to total about 4.8 million units this year. Analysts consider 6 million a healthy pace. The last time sales were lower was 13 years ago.
A third of the pending sales probably will be foreclosures or short sales, in which a homeowner sells a house for less than what is owed on it, association spokesman Walter Molony said. That tracks with the average for the year. These distressed sales go for discounts of up to 50 percent in some of the hardest-hit areas.
Many economists expect home prices to drop another 5 to 10 percent in the next six months before stabilizing. Prices fell in 20 of America’s largest cities in October, according to the Standard & Poor’s/Case-Shiller home price index, released Tuesday.
And now mortgage rates are on the rise. This week, the average rate on 30-year home loans rose to 4.86 percent from 4.81 percent, mortgage giant Freddie Mac said, the highest level in seven months. The average rate on the 15-year loan rose to 4.20 percent from 4.15 — the highest in six months.
Associated Press December 31, 2010
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