The National Association of Realtors reported today that its seasonally adjusted index of pending home sales rose 8.2 percent from January to a February reading of 97.6. So, what does that number represent? A reading of 100 would be the same level of sales activity in 2001, which is when the index was started.
Pending home sales is an indicator of future home purchases which is based on signed contracts to buy homes and there is usually a one to two month lag between a signed sales contract and the closing of escrow representing a completed deal.
The 8.2 Percent jump in February pending home sales far surpassed expectations which may be a sign that the housing market may be coming back from slow winter sales. Furthermore, this jump may also be the early stages of a second surge of home sales for spring.
This winter home sales may have been sluggish because potential buyers may have felt less rushed to buy a home after lawmakers extended the deadline to qualify for a $8000 tax credit as long as they sign a contract by April 30. Lawmakers also expanded the tax credit for those who buy a home who are existing homeowners and they could receive a tax credit of $6,500.
Governor Arnold Schwarzenegger has provided a new tax credit giving nearly 32,000 California homebuyers the opportunity to claim state tax breaks of up to $10,000 starting May 1 under a bill he signed just a couple of weeks ago.