The drop in the latest pending home sales index got a lot of press attention, but that blip downward shouldn't be your guide on what to expect for real estate in 2010.
The 16 percent decline in November pending sales from October's unusually high index was due almost entirely to buyers' behavior confronting what they thought was an expiring tax credit.
In October the pending sales index went off the charts. Buyers were scrambling to sign contracts before the $8,000 credit program expired at the end of the month.
In November, buyer behavior was just the opposite. When Congress extended the credit through next April 30, the pressure was off. Nobody needed to rush to sign contracts.
Not surprisingly, the November index hit the skids.
Meanwhile, even November's pending sales number was a solid 16 percent above November 2008. That suggests that even without the extra incentive provided by the credit, the home sale market is gaining strength for its own fundamental reasons: huge pent-up demand, low prices and great financing.
But keep this in mind: Those fundamentals are dynamic - and buyers and sellers need to stay on top of them as they change in the weeks ahead.
For example, as we've noted before here at Realty Times, with the economy climbing slowly out of recession, and the Federal Reserve expected to throttle back on its mortgage securities purchases , interest rates are now trending upwards.
Last week's thirty year average fixed rate for new mortgages hit 5.2 percent, according to the Mortgage Bankers Association. That's still very low by historical standards, but it's up nearly a quarter of a percentage point just since mid December.
Fifteen year fixed rates averaged 4.6 percent -- a rise of one third of a point in the past few weeks.
Home prices are also beginning to trend upward in key markets, according to the latest Case-Shiller home price index. In San Francisco and Minneapolis, the index is up by about 15 percent since the low point earlier in 2009, according to an analysis by Bespoke Investment Group.
The same analysis found the Case-Shiller index up 8.3 percent from last year's low point to the latest month in metropolitan Washington DC, 7.6 percent in San Diego, 7.2 percent in Denver, 6.9 percent in Chicago and Phoenix, 6.8 percent in Dallas and 6.1 percent in Boston.With reports of fewer layoffs plus significant new gains in manufacturing outplut and retail sales don't be surprised to see prices-and mortgage rates -- continue to rise in the months ahead.