top of mind
PENDING HOME SALES INDEX
Measures housing contract activity. An index of 100 is equal to the level of activity during 2001, the benchmark year.
Derived from monthly REALTOR® Conﬁdence Index. Results for March are based on 3,833 responses to 6,000 surveys sent to large and small real estate offices. The survey asks practitioners to indicate whether conditions are strong (100 points), moderate (50), or weak (0). Some data may be revised from previous issues. 71
EXISTING-HOME SALES INVENTORY Number of existing homes on the market at the end of the month.
Seasonally adjusted annual rate, which is the actual rate of sales for the month, multiplied by 12 and adjusted for seasonal sales differences.
6-MONTH EXPECTATIONS CURRENT CONDITIONS BUYER TRAFFIC SELLER TRAFFIC
Spring is in the air and so is increased conﬁdence in housing markets. But REALTORS® say tight inventories and hard-to-get credit remain drags on business. Two factors hurting credit availability are federal mortgage rules (qualiﬁed mortgage ability-to-repay rules) that took effect at the beginning of the year and increases in FHA premiums. On the plus side, fewer transactions are hitting snags because of appraisal problems.
The Need for a Federal Backstop The increased capital ﬂow is a result of
the improving economy, healthier banks, rising property prices, and plentiful cash Lawrence Yun is NAR chief economist.
creates dangerous uncertainty to subject
yields than those offered by government
the housing market to the fast-changing
whims of pure private capital. That is why
he private mortgage-backed secu-
Given this brightening picture, you
rities market is ﬁnally rebounding,
might think a return to pure private cap-
has been a leading advocate for in-
supplying capital to real estate
ital is needed on the residential side, as
creased private capital but with a contin-
transactions after a long hiatus. The
some in Congress call for. But that is the
ued government backstop.
evidence is from the commercial side of
wrong lesson to draw.
the market, which, unlike residential, has
Although we should celebrate the
the National Association of REALTORS®
Americans also get that pure privatebank mortgage lending and excessive
only private capital available to it. The res-
improved availability of private capital, we
risk-taking can lead to a meltdown.
idential side has government-backed loan
need to remember that the commercial
Watching the Federal Deposit Insurance
insurance via the FHA and government-
MBS market had collapsed by nearly 99
Corp. step in after high-ﬂying banks
backed MBS guarantees through Fannie
percent in 2009, the year after the ﬁnan-
collapsed during the Great Recession
Mae and Freddie Mac.
cial crisis, from $229 billion to $3 billion
reminds us that the bill still falls on the
and was virtually nonexistent for three
taxpayer when the federal government
market roughly doubled and is projected
consecutive years. Had such a situation
doesn’t guarantee the mortgage loans.
to rise by another 20 to 30 percent this
been the case on the residential side,
year. As a result, transactions are pro-
home sales activity could have similarly
but it’s potentially devastating for home
jected to rise by 10 to 15 percent.
crashed. Pure private capital is ﬁckle.
owners and taxpayers.
In the past year, the commercial MBS
Americans wisely understand that it
ﬂowing across the globe seeking juicier
REALTOR® MAY/JUNE 2014
Pure private capital is nice in theory,