by Jodi Summers
Happy news all around. More good words come by way of the National Association of Realtors, which reports that the pending home sales index maintained showed an annual gain in September for the 17th month in a row.
If you’re dreaming of having a pending home purchase in Santa Monica or Venice, the market is challenging right now. Inventory is way down at a mere 1.5 months of homes, and multiple offers are driving up prices. Indeed if you compare Oct-2010 vs. Oct-2012, you’ll notice that the number of Under Contract properties is up an impressive 93%. Kind of gives you a warm fuzzy about the economy finally moving forward.
The pending home sales index represents contracts signed but not yet closed. It settled at 99.5 in September. An index score of 100 is equal to the average level of sales contract activity in 2001, a year in which sales were in line with historical norms. Signed contracts typically close one or two months after the sign date.
“The level of pending contracts has remained very steady implying that this recovery is holding its momentum,” observes Lawrence Yun, NAR’s chief economist. He notes that the steady year-over-year increase in the index “is pointing in the right direction.”
Fannie Mae economists believe that the third round of quantitative easing (“QE3″) announced by the Fed on Sept. 13 to boost mortgage-backed security (MBS) purchases. The Federal Reserve is boosting holdings of longer-term mortgage-backed securities and Treasuries by about $85 billion a month through the end of the year, in the hopes of putting downward pressure on longer-term interest rates and supporting mortgage markets and giving the U.S. economy some momentum. Next year they will buy $40 billion a month. This could last through all of 2013 and perhaps into 2014, adding $1 trillion to the Fed’s portfolio.
“This should create a massive demand in MBS, drive up their prices, reduce their yields, narrow the secondary mortgage spreads significantly, and effectively drive primary or retail mortgage rates lower,” Fannie Mae economists note, predicting that rates on 30-year fixed-rate mortgages will average 3.4% next year, down from 3.6% this year.
The recovery could still be sidetracked by slowing economic growth in Europe and China and the so-called “fiscal cliff” – that series of spending cuts and tax increases set to go into effect Jan. 1 unless U.S. lawmakers come up with an alternative plan for tackling deficit spending.
We’re here to help you with your property needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – or 310.392.1211, and let us move forward together.