Pending Home Sales Show Great Comfort (XHB)

Posted: May 4, 2009 at 9:17 am

If you are an investor or a buyer in the market for a new home or if you are a homebuilder, there may be some good news after waves and waves of bad news and then “less-bad news.”  The National Association of Realtors said that pending home sales have risen with many new first-time homebuyers taking advantage of the affordability of housing.  Pending Home Sales rose by 3.2% in March, 2009 to 84.6.  This compares to 82.0 in February and 83.7 in March, 2008.  This has the SPDR S&P Homebuilders (NYSE: XHB) screaming on the news.

The Association noted that it may take several months for the market to gain momentum.  One factor noted is this $8,000 tax credit.  Another factor is that housing is at a near-record level for affordability.  The affordability index was at 166.7 in March, 2009, down from a revised 174.4 in February, 2009 but up over 30 percentage points year over year.

This report shows that a median-income family that earns $61,100.00 per year could afford a home costing $291,600 in March.  This assumes a 20% downpayment and is also assuming 25% gross income level is devoted to mortgage principal and interest.

Maybe in 2010 we will be back to families earnings $40,000 and under getting into homes with a listed price of $975,000.00.

The SPDR S&P Homebuilders (XHB) is responding with shares up 5% at $13.86 on the news.

JON C. OGG

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