Though it is easy to focus on the negative results of the housing market's decline over the past few years, signs of growth and significant improvement have emerged in recent months. The number of house sales and housing prices continue to rise, forming positive patterns, and the quality of new homes being built has improved due to the amount of competition the field saw as the housing market shrank.
According to the National Association of Realtors' Pending Home Sales Index, more home sales contracts were signed in August than during any other month this year. The 6.4% surge far surpassed the 1% increase predicted by many economists and the 3.2% increase during the month of July. Moreover, August marked the seventh month-over-month improvement in number of homebuyers signing sales contracts.
Many argue that this increased number is also attributable to the rush of first-time homebuyers to take advantage of the $8,000 tax credit provided by the federal government, which expires November 30th of this year. Estimates state that this credit has allowed for an extra 350,000 home sales. Still, the sharp rise is a good sign for the real estate market. Pending sales - as opposed to actual closings which get marked two or three months later as existing home sales - are considered a positive and progressive indicator of housing market health.
One factor detracting from this success measurement is the amount of deals that are not actually closing, most notably due to the long delays in obtaining short sales. In addition, the number of foreclosure filings is still well above the norm and will continue to be while mortgages such as interest-only loans are reset and homeowners' monthly mortgage payments increase.
Another indicator of a resurging market is house prices, which have now been on the rise for three consecutive months. The S&P Case-Shiller Home Price index reported that the price index of 20 cities had increased 1.6% for the month of July following a 1.4% rise in June. Though there has still been a 13.3% total drop since July 2008, the market has actually recovered faster than was expected, with many estimates placing the decrease at a total of 14.2% at this point in time.
Experts say that this three-month pattern comprises a trend of growth for the market, but many warn that another small decline will take place in the months ahead. When option ARMS and interest-only loans are reset over the next few months, payments will increase, and probably lead to more foreclosures. Then prices will once again dampen, and there is significant concern that the market may suffer a reversal following the end of the first-time homeowners' tax incentive.
Despite all this, both the factors of increasing number of home sales and the price for which these homes are selling are encouraging, even with the bumps that are expected in the road ahead.
In addition to these improvements in the housing market, the 2009 U.S. New-Home Builder Customer Satisfaction Survey released by J.D. Power and Associates last month showed that overall customer satisfaction in new homes has increased for the second year in a row. While the number of new homes built is obviously lower than in years past, the quality seems to be much better.
Many attribute this to the competition within the field as the market declined, which has allowed the best, strongest companies to survive. The study bases satisfaction on nine factors: workmanship/materials, builder's warranty/customer service staff, price/value, builder's sales staff, construction manager, home readiness, recreational facilities provided by the builder, builder's design center, and location.
Less attention has been paid recently to the construction manager or readiness of the home, the study reports, mainly because there is a surplus in new homes, with many new buyers being able to move in immediately without having to check up on the construction of their home, as in years past during the housing market's boom. Upgrades have also become common, keeping consistent with the trend of improved quality at lowered prices.
26,231 buyers of new, single-family homes responded to the survey, with an average satisfaction rating of 811 on a 1,000 point scale, up 32 points from last year's survey. Customer-reported problems also decreased, from 11.51 problems per home in 2008 to 9.55 problems in 2009.
Though the housing market has suffered inarguable decline in the last year, the road to recovery has begun, and ground has been gained in the past few months in the amount, price, and quality of homes being sold.
