Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for March showing a significant 5.3% increase since February and a whopping 21.2% increase compared to March 2009 as buying activity picked up in advance of the second (and final) expiration of the government housing tax gimmick that ended in April.
Meanwhile, the NARs chief economist Lawrence Yun suggests that this second stimulus surge will result in lower sales immediately following the expiration but "self-sustaining" sales beyond that.
"Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales, ... Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing."
It appears that Yun believes that the government cleared the massive residential real estate market by simple subsidy.
Although the real test is truly ahead, its important to consider the continued effect of the artificially low interests rates for FHA, Fannie and Freddie backed home mortgages.
If rates gradually rise, lending standards continue to tighten, foreclosures rise and prices fall as appears to be the likely trends for the remainder of 2010, the "organic" trend will likely look less like a "stabilization" and more like a grind-down.
The following chart shows the national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).