Despite the 22.4 percent annual increase in pending home sales in April, many of those sales may be canceled if they do not close by the tax credit deadline. These cancellations, along with a steep decline of new mortgage applications, could result in a significant drop off in home sales. See the following article from HousingWire for more on this.
The jump in pending home sales seen in April and even March — ahead of the first-time homebuyer tax credit expiration on April 30 — may not necessarily translate into sales, according to outlook and commentary services firm Econoday.
By extension, the firm said, the “unexpected strength” in pending sales during recent months (illustrated below) may not take as many homes off the market as initially suggested.
“Many pending sales may not have closed by the required [tax credit] deadline and will never close,” said Econoday senior economist Mark Rogers in recent commentary.
The possibility that many pending sales never become final, taken alongside recent plummets in purchase mortgage applications measured by the Mortgage Bankers Association, indicates home sales are “almost certain to slump in May,” Rogers added.
Analysts expected a softening in pending home sales in April, as home purchases had to be under contract by the end of the month in order to qualify for the tax credit. Pending sales in February and March spiked with what Econoday considered “last minute” buyers hoping to leave enough time to close.
“But apparently, many buyers decided to push their luck and buy during April in hopes of expedited paperwork by mortgage lenders,” Rogers said.
Pending sales grew 6% in April, following a 7.1% spike in March, according to the National Association of Realtors. Year-on-year, pending home sales are up 22.4% from April 2009.
This article has been republished from HousingWire. You can also view this article at HousingWire, a mortgage and real estate news site.