Nationally, home sales activity "surged" in September as buyers took advantage of low home prices and affordable interest rates, according to a NATIONAL ASSOCIATION OF REALTORS® report released today. The Pending Home Sales Index, a forward-looking indicator based on home sales contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4. This could be a sign of a turnaround in the housing market. Apparently, home buyers are responding to improved affordability. “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island, and the Washington, D.C., region,” according to Lawrence Yun, NAR chief economist. Flagstaff homes sales volume and home prices began to decline after most of the rest of the nation 2005. It seems likely that Flagstaff home sales recovery will lag the rest of the nation for reasons I’ve discussed in the past, but which largely have to do with the large piece of our market that is attributable to second-home ownership. The cause of the national improvement in pending home sales is unclear. According to the NAR press release, quoting Yun: “The improvement reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.” In other words, these contracts for sale may not result in actual sales if the credit markets are unable to provide the mortgage money upon which the buyers’ purchases depend. In the NAR press release, Yun noted the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.” In other words, August could have been a good month because it was really making up for the month prior when markets were frozen by the credit crunch in housing. Whether that credit crisis will make the August results a one-month blip is hard to know. Like the rest of the economy, housing is in uncharted territory and there is a long way to go to get back on course. It seems unlikely that we should be as optimistic as the National Association of Realtors® given the continuing rise in unemployment and the number of ARM mortgages that still are due to reset over the next 18-24 months – as they reset at higher rates, there will be more foreclosures, although perhaps not at the rate we have seen so far because of the housing rescue bill that was passed this summer. All we can say for sure is that Flagstaff real estate is in a buyers’ market right now. If you need a house, you’ve got an advantage in negotiating with the sellers and you’ve got a nice selection to choose from. Call Team Heitland at RE/MAX Peak Properties and we’ll use our expertise to find you the right home at the right price for you. | 
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