What a happy way to bid 2011 goodbye. According to the National Association of Realtors®, the number of contracts signed for future purchase of existing homes rose 7.3 percent. That’s the highest gain in 19 months. Plummeting prices and low lending costs accelerated the numbers, which economists were expecting to rise by 1.5 percent.
Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, NAR chief economist Lawrence Yun said in a release.
“Some of the increase in pending sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,” Yun said.
“It looks like buyers are becoming more confident and are attracted to record-low mortgage rates,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, according to Bloomberg. But, “activity still looks depressed by historical standards,” he said.
Nevertheless, the industry is showing signs of stabilization with declining inventory, rising construction and builder confidence, Bloomberg said. But the dark days are far from over. These numbers may be hit by another expected wave of foreclosures that could again dent home prices and damage consumer and builder confidence. For now, let’s just celebrate the good news.
Pending home sales were up 6.9 percent in November when compared to a year ago. The Western region saw the biggest bump with a 14.9 percent surge.
Mortgage Interest Rates Still Low
The last week of the year continued to see mortgage rates hovering at the bottom. Borrowers with stellar credit records could clock in a 3.95 percent rate on a 30-year fixed-rate mortgage. That’s the ninth consecutive week of rates at or below 4 percent, according to the Los Angeles Times. Had it been a robust economic period, consumers would have laughed all the way to the bank and back to their new homes. The last time mortgage interest rates were this lucrative was back in 1971, the L.A. Times said. In 2000, rates were more than 8 percent, the Times said. So, why haven’t we seen a surge of buyers gobbling up inventory in the market? That’s where the state of the economy steps in.
“Remarkably low rates are not enough,” said Mortgage Bankers Association economist Michael Fratantoni to the LA Times. He said that many homeowners have difficulty refinancing because of “lack of equity in their properties, poor credit and a weak job market.”
Mortgage applications decreased at the year end, according to the latest Mortgage Bankers Association survey. The index for mortgage loan application decreased 2.6 percent on a seasonally adjusted basis from one week earlier, the release said. On an unadjusted basis, it decreased 2.8 percent compared with the previous week.
“Continued anxiety surrounding the fragile economic situation in Europe led interest rates lower last week. However, refinance applications fell slightly, and purchase applications dropped further as we head into the end of the year,” Fratantoni said, according to media reports.
Asian Investors Flooding the L.A. Market
Plummeting home prices are luring Asian buyers to the Los Angeles market, and they are buying up homes on foreclosures and short sales, NPR reported. Realtors® are welcoming these new buyers with open arms and are aggressively targeting them. Andy Chu, a local real estate agent, told NPR that he is advertising in the Asian newspapers. He says that having more buyers would mean a better market with stabilizing prices and “income-producing” homes. Chu’s clients from Asia are now a quarter of his business, and he likes them because they buy multiple properties in cash.
There’s no reliable data on the number of investors pouring in from overseas and buying up properties, but NPR reports that most of them are from Asia and Canada. Realtors® are trying to cash in on the trend. The 2012 strategy for the Las Vegas chapter of the Asian Real Estate Association of America is to help realtors® get more international business through new Web tools and networking opportunities, NPR said.
“International investors, we see them as absorbing a lot of the inventory,” Joseph Lai, the association’s chapter president, told NPR.”They are going to come in, make them income-producing properties, and then they are going to fix them up, get them into livable shape, get them rented out.”