Home Sale Contracts Up Again In May Nationally

The Pending Home Sales Index reported a slight increase in the number contracts signed in May nationally.  This news comes as a pleasant surprise, perhaps indicating some home buyer confidence in the residential market.   Reported by the National Association of Realtors, the small tenth of a percent increase marks the forth straight month of increased sales interest.  Perhaps not a true indicator of sales, the Pending Home Sales Index is meant to forecast home sales contracts  activity that may or may not make it to a real estate closing.

This data may be a reflection of burgeoning confidence in the market bottoming out or the effect of the federal tax credit for first-time home buyers.   Whatever may be the cause, this marks the first time since October 2004 that four consecutive months have shown increases in contracts for homes.

Many experts warn that the easy part of process in purchasing a home is entering a contract.  If the buyer has a home sale contingency or the home under contract to purchase is adversely effected by the new appraisal rules, the contract can fall through.  Not to mention the stricter financing qualifications imposed on mortgage lenders.

Much has been made of the new appraisal rules driving down values of existing real estate.  Many homes that are in foreclosure or homes sold in short sale types of transactions are being used as direct comparisons to houses, sometimes from different markets.  These valuations kill deals and further depress market conditions, critics argue.   The equity lost in these valuations have financing implications for families trying to just keep their homes as it becomes difficult to even refinance their current mortgage.