The snow melted, the spring housing market warmed up and the deadline loomed for the home buyer tax credit. All three combined to help NAR’s Pending Sales Index rise 8.2 percent in February following a dismal January.
Though the news was greeted with joy and buoyed the stock market, the Index only rose exactly to its level in December. When fell unexpectedly in January, when the failure of the tax credit and bad weather got the blame. Except that February’s weather was worse than January’s in most sections of the country.
When Pending Sales rose unexpectedly today (Economists surveyed by Thomson Reuters had expected the index would fall slightly to 90.3.), the tax credit got the credit. Forget about everything else.
“Home sales had been sluggish during the winter, partly because shoppers felt less rushed after lawmakers extended the deadline to qualify for a tax credit,’ reported National Public Radio. NPR didn’t mention that it’s also difficult to show a home during a blizzard.
The report “may signal the early stages of a second surge of home sales this spring,” said Lawrence Yun, NAR’s chief economist.
Yet the fact is that many brokers report that many buyers, especially move-up buyers, are more motivated by interest rates hovering around five percent, prices lower than they have been in three years, and robust inventories than they are by the tax credit.
The greatest month-to-month increase was in the Midwest, where pending sales jumped nearly 22 percent. Sales climbed 9 percent in the South and Northeast, but fell about 5 percent in the West. Until mid February, much of the Midwest was under several feet of snow,
Unless the tax incentive is extended again, the jump in home sales “will prove temporary, and another setback will occur before too long,” wrote Joshua Shapiro, chief U.S. economist at MFR Inc. told NPR.
Extended again? A safer prediction: not many houses will go under contract next time half the nation is under 18 inches of snow.