Pending home sales – sales contracts that have yet to close – hit a two-year high in January, the National Association of Realtors said Monday, approaching levels last seen during the federal homebuyer tax credit program in the spring of 2010.
However, in the Midwest the index was down 3.8 percent from December but remains 10.8 percent higher than January 2011. That leaves the Wichita area teetering on the edge of a major housing recovery, analysts say, with easier credit the trigger that could trip a market boom.
Lawrence Yun, NAR’s chief economist, said in a statement the positive sales start to 2012 should create momentum for the year.
“Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year,” Yun said. “With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.”
The index has been a roller coaster, Yun said, reflecting tight credit policies in the wake of the 2008 recession, but job gains, affordable housing and rising rents may be enough to push the market into a sustained recovery.
“If and when credit availability conditions return to normal, home sales will likely get a 15 percent boost, speed up the home price recovery and thereby significantly reduce the number of homeowners who are underwater,” Yun said.
Easier credit would also launch the Wichita market, said Tessa Hultz, the CEO of the Wichita Area Association of Realtors.
“I hear from brokers a lot about their clients trying to get financing and the margins being very close,” Hultz said. “If a house appraises $2,000 under the contract, the whole deal falls apart. So yeah, I think it would be another factor in consumer confidence moving forward and those two are so tied.
“If they’re both moving forward together, then I think we’ve got the sales numbers we’d expect to be more like 2007 or 2008 with the median price levels we’re at. We’re poised for the loosening of credit, for the next step, for the upswing.”
Hultz and Stan Longhofer, director of Wichita State University’s Center for Entrepreneurship, said pending sales are spiking this year, up almost 30 percent in January to almost 1,000 units, a number rivaling last summer at a time when sales historically slow because of bad winter weather.
“But I don’t think that we need to see some dramatic easing of credit for the market to rebound,” Longhofer said. “We’ve seen some very slow easing of credit, and you don’t have the extreme tightness we had a couple of years ago.
“The bigger issue has been the fear factor and the uncertainty of consumers, which is easing as well. We still feel good about our forecast of a stronger spring selling season.”