The Pending Home Sales Index plunged in May 2010, just one month after the expiration of the federal home buyer tax credit program.

The Pending Home Sales Index is now at a record-low level.

A “pending home sale” is an existing home under contract to sell, but not yet closed. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days.

Because of this timeline, we can expect the summer’s Existing Home Sales to be weak, too. With fewer homes going under contract, fewer homes can close.

On the surface, May’s Pending Home Sales Index looks like terrible news for housing. And, if you’re a seller, it just might be. But, if you’re a buyer, the story reads differently.  Just consider the market conditions. 

A broad look at the housing market shows:

1. Home supplies are rising in most markets
2. Home sales are falling in most markets
3. Mortgage rates are at all-time lows

In other words, in most markets, more sellers are competing for fewer buyers, and the “winning” buyers are financing their homes at the lowest rates in history.

It’s an excellent time to be a home buyer in Manchester.

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Standard & Poors released its Case-Shiller Index Tuesday.  The index is a monthly home valuation report from select cities and among the private sector’s most popular home pricing models.

In reviewing the April Case-Shiller Index and its accompanying analysis, it appears that the housing market’s rebound is gathering momentum.

In the index’s 20 tracked cities:

• 18 of 20 improved from March to April 2010
• Versus April 2009, home prices are up nearly 4 percent
• The two “down” cities from April — Miami and New York — are off just 0.5% and 1.0% annually, respectively

Furthermore, as another sign of strength, San Diego, a city in which homeowners have lost a lot of equity since 2007, has now shown 12 straight months of home price improvement.

However, the Case-Shiller Index must be kept in context. It’s far from perfect.

For one, the index reports on a 60-day delay; it’s only now showing data from the end of April, when the federal homebuyer tax credit was expiring. Home sales have been weak since then it’s been reported.

And second, the Case-Shiller Index is limited to just 20 cities nationwide. Therefore, the index doesn’t consider every home sale in every American city — it only considers a select few. Many more U.S. homes are excluded from the Case-Shiller Index than are included.

But, despite its flaws, the Case-Shiller Index remains important with respect to economic analysis. Much like the government’s Home Price Index, Case-Shiller helps to identify broader trends in housing that shape government and monetary policy.

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In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:

• You can’t purchase the home from a parent, spouse, or child
• You can’t purchase the home from an entity in which the seller is a majority owner
• You can’t acquire the home by gift or inheritance
• Each buyer in the purchase must meet eligibility requirements

There’s other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.

And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction. This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase. You may find sellers more willing to negotiate today than several weeks from now.

For more, clear, accurate honest mortgage info, check out TheHomeBuyerIQ!

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Using data compiled in December, Standard & Poors released its Case-Shiller Index Tuesday.  The report shows home prices down just 2.5% on an annual basis, a figure much lower than the 8.7% annual drop reported after Q3.

According to Case-Shiller representatives, the housing market is “in better shape than it was this time last year”, but some of the summer’s momentum has been lost. 15 of 20 tracked markets declined in value between November and December 2009.

Meanwhile, it’s interesting to note the 5 markets that didn’t decline — Detroit, Los Angeles, Las Vegas, Phoenix and San Diego.  Each of these metro regions were among the hardest hit nationwide when home prices first broke.  Now, they’re leading the pack in price recovery.

For some real estate investors, that’s a positive signal.  But we also have to consider the Case-Shiller Index’s flaws because they’re big ones.

As examples:

1. Case-Shiller data is reported on a 2-month lag
2. The Case-Shiller sample set includes just 20 U.S. cities
3. There’s no “national real estate market” — real estate is local

That said, the Case-Shiller Index is still important. As the most widely-used private sector housing index, Case-Shiller helps to identify broader housing trends and many people believe housing is a key element in the economic recovery.

If the markets that led the housing decline will lead the housing resurgence, December’s data shows that full recovery is right around the corner.

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On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls data from the month prior. The data is more commonly known as “the jobs report” and it swings a big stick on Wall Street.

Especially now — many analysts believe job growth is tightly linked to the future of the U.S. economy.

Therefore, when January’s jobs report hits the wires at 8:45 AM ET tomorrow, Manchester home buyers would do well to pay attention. A net job reading that is much higher (or lower) than Wall Street’s expectations can make a serious change in home affordability.

Wall Street expects that the economy added 13,000 jobs last month.  It would mark the second time in 3 months that the jobs report showed a net monthly gain.

In November 2008, the economy added 4,000.

Jobs matter to the economy for a lot of reasons, but one of the biggest is that when Americans are working, Americans are buying and consumer spending accounts for 70 percent of the economy.

Job growth spurs the economy and draws money to the stock market. Unfortunately for rate shoppers, that kind of stock market growth happens at the expense of the bond market which is where mortgage rates are made.

Good jobs data usually means higher mortgage rates.

Also, job growth can lead to higher home prices. This is because working homeowners are less likely to default on a mortgage versus non-working homeowners.  In this way, job growth helps hold foreclosures to a minimum which, in turn, suppresses the housing supply.

Less supply means higher prices for home buyers.

Mortgage rates are idling this morning in advance of tomorrow’s data.  If you’re shopping for a mortgage rate, the prudent play may be to lock your rate before the jobs data is released.  A jobs figure that’s higher than the 13,000 expected could cause rate to rise sharply.

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The Pending Home Sales Index rose slightly in December, climbing 1 percent from November.

A Pending Home Sale is a home that is under contract to sell, but not yet sold. It’s a figure compiled by the National Association of Realtors® using sales data from over 100 regional listing services and more than 60 large brokerages around the country.

Because each pending sale is a true measure of sales activity, the Pending Home Sales Index is purported to be the most reliable forward-looking indicator for housing.

Recent data supports this hypothesis.

After Pending Home Sales plunged 16 percent in November, Existing Home Sales fell by 17 percent in December.  Based on the most recent Pending Sales Index, therefore, we can expect January’s closed sales to be similarly level.

For home buyers in Manchester , this is all a bit of good news. Home prices are based on the supply-and-demand balance that exists between buyers and sellers.  When buyers outnumber sellers, like they did through most of 2009, home supplies dip and, in fact, the national home inventory nearly halved during the 12 months ending November 2009.

With fewer homes for sale, multiple-offer situations were almost commonplace and home values rose as result.

Activity has since slowed, however, and fewer buyers are in today’s market. The supply-and-demand equation has shifted back some. In December, home supplies rose for the first time in 7 months and January will likely show the same.

The net result: Home buyers have more homes from which to choose and that can create negotiation leverage for better prices and better concessions.

With mortgage rates still low and a looming deadline on the homebuyer’s tax credit, market activity should be strong between now and April.   Take your time and bid right. And when you’re ready, be ready. The best deals likely won’t last.

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Just one month after from blowing away Wall Street, December’s Existing Home Sales hit the skids, shedding nearly 17 percent and falling to a 4-month low.

Don’t be alarmed, though. The plunge was expected. And not just because Pending Home Sales cratered last month.

When November’s Existing Home Sales surged, it was clear to observers that an expiring $8,000 federal tax credit was the catalyst. At the time, the tax program was slated to expire November 30 and the looming deadline pushed a lot of would-be buyers in Manchester from a December time frame into November.

The expiration date has a cannibalizing effect on December’s sales figures. It was only later that Congress extended the tax credit to June 30, 2010.

So, with home sales plunging in December, it’s no surprise that home supplies rose for the first time in 9 months.  Home Supply is calculating by dividing the number of homes for sale by the current sales pace.

The national housing supply now rests at 7.2 months.

Despite December’s Existing Home Sales report appearing shaky, it’s actually terrific new for home buyers in neighborhoods like Nashua.

See, for the past few months, as housing has been improving, sellers nationwide have been bombarded by messages of “hot markets” and rising home prices by the media.  Psychologically, a seller is more likely to hold firm on price if he believes the housing market is improving and now December’s data is deflating that argument.

This is why we say there’s always two sides to a housing story — the buyers’ side and the sellers’ side. And, usually, what’s good for one party is bad for the other. It’s what we’re seeing now.

Because of soft data like December’s Existing Home Sales, buyers may retake some negotiation leverage that’s been lost since Spring 2009, helping to improve home affordability and, perhaps, spur more sales.

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Conforming and FHA mortgage rates improved last week on the combination of weaker-than-expected economic data and new anti-banking rhetoric from the White House.

The S&P 500 shed nearly 4 percent in its worst weekly showing since October 2009 as all 10 sectors fell. As the money left stock markets, it made its way to bonds — including the mortgage-backed variety.

As a result, NH mortgage rates fell for the third straight week.

Since shedding 300 basis points in December, mortgage bond pricing has recovered a bit more than half of those losses.  It’s helping with home affordability and opening new refinance opportunities in Bedford and around the country.

This week, though, mortgage rates could rise back up.  There’s a lot going on.

First, on Monday, the December Existing Homes Sales report will be released.  The report is expected to be extremely weak as compared to November.  This is because of a combination of factors including:

1. The initial tax credit expiration date of November 30, 2009
2. Sharply rising mortgage rates throughout the month of December
3. A general slowdown from the holidays and from the weather

Therefore, don’t be surprised by the newspaper headlines you see Tuesday morning.

Other data this week includes the Case-Shiller Index – a measure of home prices nationwide — and the New Home Sales report. The Case-Shiller Index has registered mild home price improvement over the past 8 months and its latest report is expected to show the same.  New Home Sales should be similarly strong.

But, the biggest news of the week is the first Federal Open Market Committee meeting of 2010. 

The Fed meets Tuesday and Wednesday this week and Wall Street will be watching closely.  The Fed is not expected to change the Fed Funds Rate from its current target range of 0.000-0.250 percent, so, instead, markets will watching for the Fed’s post-meeting press release.

What the Fed says about the economy will be much more important that what it specifically does about the economy for now.  If the Fed says the economy is growing as expected, look for mortgage rates to rise. Conversely, if the Fed says the economy is at risk, expect mortgage rates to fall.

The safest rate lock strategy this week is to lock your mortgage rate before the Fed’s 2:15 PM ET adjournment Wednesday.  Rates will be bouncy all week, but once the Fed’s press release hits the wires, it’s anyone’s guess what will happen.

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