Flagstaff Real Estate News July 1, 2010

Following a surge driven by the home buyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator, dropped 30.0 percent to 77.6 based on contracts signed in May from a reading of 110.9 in April.

Pending home sales in the West, the region that includes Flagstaff, was off only 20.9% while all other regions were of by over 30%. The falloff comes on the heels of three strong monthly gains as home buyers rushed to take advantage of the tax credit.

The data reflects contracts and not closings, which normally occur with a lag time of one or two months. However, many closings have been delayed recently from a rush of buyers into the system and slow processing of short sales, in addition to the heavy volume and a more thorough loan underwriting process.

As many as 180,000 buyers who signed contracts by April 30 may have missed the June 30 closing deadline for the tax credit. However, Congress passed legislation yesterday to extend the deadline for delayed contracts and President Obama is expected to sign.

NAR chief economist Lawrence Yun said, "Existing-home sales that close in June will remain elevated, but we'll then see a notable decline for July and August."

Yun noted the tax credit has broadly stabilized home prices. "Without the tax credit, there will be more aggressive price negotiations between buyers and sellers. The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year. We'll also keep a close eye on market conditions on the Gulf Coast."

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