The National Association of Realtors reported that pending home sales of existing homes surged in October to the highest level in three and a half years.  The surge in sales is being credited to the record setting low mortgage rates which are still available this week, and of course, the first time home buyer tax credit.

Pending home sale numbers lead actual closed home sale numbers by 1 to 2 months due to the length of time it takes to get a signed purchase agreement converted to a closed home loan.  If all the signed purchase agreements result in closed mortgages, we should see great numbers for existing home sales for the months of November and December this year; far better numbers than analysts had been forecasting.

In addition to existing home sales numbers, new home construction actually contributed to the economy during the third quarter of this year.  Developers are more optimistic that this trend could continue with the extension of the first time home buyer tax credit into 2010.  For those home buyers who are looking to purchase a home under construction, it is advised that you get that purchase under contract soon as it could take well into 2010 for that home to be completed and to qualify you for the tax credit. 

There is some concern that we could see home sales, both new construction and existing home sales, drop again next year if those who are qualified and contemplating a home purchase don't get out and start home shopping quickly.  The average home owner takes 3 - 5 months from the date of beginning to search for a home to the date of closing.  The average home loan takes approximately 45 days from date of loan application to date of recording the deed and closing.

Pending home sales index showed big increases in all areas of the country except the West where the index actually dropped.  This is consistent with the recent Case-Schiller index which showed home values stabilizing and actually appreciating in all areas of the country except the Pacific Northwest. 

The Pacific Northwest was the last area of the country to enter the inflationary home valuation cycle, the last area to start to feel the decline in values, so it looks like it will also be the last to stabilize and start to see some appreciation in values. 

Resources:  Pending Homes Sales Have Record Rise