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Pending Home Sales Up for Third Consecutive Month

The combination of low mortgage interest rates and the first-time buyer tax credit helped boost pending home sales in April for the third consecutive month, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7% to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5, the association reported last week.

"Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market," said Lawrence Yun, NAR chief economist.

"Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyer, " he added.

The Pending Home Sales Index in the Northeast climbed 32.6% to 78.9 in April and is 0.8% above a year ago. In the Midwest the index rose 9.8% to 90.4 and is 11.1% above April 2008. The index in the South slipped 0.2% to 93.0 in April but is 3.5% higher than a year ago. In the West the index rose 1.8% to 94.8 but is 2.9% below April 2008.

NAR president Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, pointed to the impact of buyer assistance programs around the country. "Some states are offering bridge loans that allow first-time buyers to use the tax credit for down payment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location," he said.

The U.S. Department of Housing and Urban Development in late May announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger downpayment.

NAR's Housing Affordability Index is "in record territory," the association report.

Its affordability index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.

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