Today's bullish report on pending home sales came with a caveat from the Realtors:
"If banks would simply return to normal, sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector," said National Association of Realtors chief economist Lawrence Yun.
That part has been their mantra for months. No surprise there. But then:
"In addition, a nonsensical situation has developed recently in some states with HUD unable to complete foreclosure deals because of insufficient funds to pay attorney fees at closing, even with buyers offering the full listing price," Yun added.
This was new to me, so I called over to HUD, and let's just say they were not exactly thrilled with the Realtors' statement.
HUD says what the Realtors are talking about only affects sales of HUD-owned foreclosures in six states in the Northeast, and dare I say the Northeast is not where the greatest volume of home sales are taking place right now anyway.
So this from HUD: "Closing on approved purchases of HUD-owned properties has been temporarily delayed in New England. Due to increased demands, funds for closing contracts in this region have been expended and HUD is currently negotiating new contracts. Once they are executed, closings will resume.
During this period, all contracts will be extended, when necessary, at no cost to the buyer. Purchasers will be advised as soon as funding becomes available for closings, and a closing date will be established as soon as possible thereafter."
Apparently everything in Connecticut and Rhode Island will be back on track in two weeks, Main and Vermont will take two to four weeks, and closings in Massachusetts and New Hampshire "were expected to resume yesterday."
So that makes the Realtors' complaint sound at best a bit petty and at worst inaccurate. This, as they are releasing some really positive numbers that went beyond the street's expectations.
I'm wondering if they had the excuses lined up because they knew folks like me were going to poke holes in their 8.2 percent monthly jump in contracts signed for existing home purchases.
Let's start with the fact that this big monthly jump comes after a larger drop in April, so the index is still at its second lowest level since last November. Okay, but the index was up over 13 from May 2010. Right, and last April 30th marked the expiration for signing contracts to get the home buyer tax credit, so you had a big May drop-off, and therefore you have nowhere to go from that but up.
I might also add that the biggest jump in the index was out West—nearly 13 percent—and that's the region dealing with the biggest volume of distressed properties.
One analyst immediately cautioned me that many of these contracts are on short sales (when the bank agrees to let the home be sold for less than the value of the mortgage because the seller is either underwater and/or behind on payments), "And short sales generally always go pending even though they may not result in sales...much of this is due to fraud."
I don't mean to knock a bright spot in housing. Anything to the positive is better than the alternative. I just think we need to keep all these big numbers in perspective, especially since the volumes are so historically low right now, that any move in any of these "indices" may result in bigger percentage numbers than usual.
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