Pending home sales, a measurement of existing homes under contract that have yet to close, have increased for the second month in a row, according to the National Association of Realtors®. The 4.5% increase in pending home sales in August over the July number is particularly important in my opinion given the forecast the mainstream media was for housing to slump after the tax incentives from the spring expired.

Remember those tax incentives that allowed for a significant tax credit if you contracted on a house by the end of April and closed by the end of June, 2010?

I do.

I also remember the hand-wringing that came from the media about how government was interfering in the free market and all the predictions the housing market would suffer in the months to come.

Oops!

The Pundits Were Wrong

On the heals of the incentive increased sales numbers, all the pundits said we’d get a dip in sales once the tax incentives expired…typical “doom and gloom” punditry.

Where are those pundits now that pending home sales for both July and now August are showing gains?

I guess being wrong means you run and hide or you wait for some bad news to talk about.

In the press release, Lawrence Yun, NAR chief economist, said,

“Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market. However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence.”

Mr. Yun is right of course, but you must admit these pending home sales numbers are a very good sign for a recovering housing market. It should not be downplayed or dismissed by the media…but it will be.

If you are in the market for a home this is one of the economic indicators that should give you hope that the time to buy is close if not already here.

A Closing Window of Opportunity

Mr. Yun goes on to say,

“Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs.”

One fly that could get in the ointment is inflation which would trigger higher mortgage rates. Increased employment, higher wages, and robust economic growth usually go hand in hand. These trends also bring with them inflation. The Fed currently is not worried about inflation, so right now Yun is saying we have a “perfect storm” (in a good way) for home buying if you will…at least for those still employed.

Sure the housing and financial crisis hurt a lot of folks. Yes, a lot of home owners lost out. But like all correcting markets, after the storm comes the calm. And in this calm, if you have the means, the low interest rates combined with “at the bottom” real estate prices, is your time to profit.

This window as Yun warns will not be open forever. Once the economy starts really churning, putting folks back to work in a meaningful way, inflation will be back and the Fed will have to raise interest rates.

This “good” home buying market will be over until the next boom and bust cycle plays out.

Get your piece of the pie before the window closes.

You should look into buying a foreclosure home directly from Fannie Mae or Freddie Mac. I read a story earlier in the week about how some of these home are being sold at about a 30% discount to the existing home prices and the two GSE’s have special financing set up to make buying these home easier.

Get out Fannie’s website here and Freddie’s website here.

Good Luck!

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