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Pending Home Sales Increase to Highest Level Since 2010 Home Buyer Tax Credit

Pending Home Sales Increase to Highest Level Since 2010 Home Buyer Tax Credit

The Pending Home Sales Index, a forward-looking indicator based on signed contracts, increased 2.4 percent in July 2012 to 101.7 from 99.3 in June. The July 2012 PHSI was 12.4 percent higher than the same period a year ago. The PHSI is at its highest level since April 2010 when the home buyer tax credit was about to expire. The National Association of Realtors (NAR) reported that the July PHSI was up in all regions but the West. The year-over-year increases were 13.4 percent in the Northeast, 20.2 percent in the Midwest, 15.6 percent in the South and 1.3 percent in the West. July new home sales also declined slightly in the West from the previous month. If contracts closed at the same time they were signed, this graph would be the correspondence between sales and the PHSI. So the PHSI is a good indicator of what will likely happen to existing home sales when the contracts close in coming months. We anticipate that the August and September existing sales data will reflect today’s pending sales report.

Treasury Announces Further Steps Toward Housing Finance Reform

On Aug. 17, the Treasury Department announced significant changes to an agreement with the Federal Housing Finance Agency dealing with the conservatorship of Fannie Mae and Freddie Mac. Under this agreement, Fannie and Freddie were required to pay a 10% annual dividend to the government on funds they have borrowed from Treasury. The revised terms eliminate the 10% dividend charge and instead require Fannie and Freddie to transfer future profits to Treasury until their outstanding government obligations are extinguished. This change means that Fannie and Freddie will not add to their outstanding debt to Treasury (and possibly hit their debt ceiling) in paying government dividends. It also establishes a means for them to eventually extinguish this debt. Treasury also changed the rate at which Fannie and Freddie are required to wind down their portfolios, from 10% to now 15% per year. These changes are further steps toward broader reform of the housing finance system, which is currently stalled in Congress.

GOP Draft Platform Includes Mortgage Interest Deduction

In an action that helps cement much-needed political support for a tax break that primarily benefits middle-income families, the GOP Platform Drafting Committee this week recognized the importance of the mortgage interest deduction (MID) by including it in the party's draft platform. This welcome move followed a preliminary vote that, as reported by various news outlets, initially resulted in the MID being omitted from the platform language -- but proved not to be the end of the story. Reacting to the good news this week, NAHB CEO Jerry Howard said, "We are very pleased that the committee has recognized the crucial importance of the mortgage interest deduction.
Middle-class voters have seen their household wealth decline throughout the recession, and to a large extent, they are the ones who will decide the outcome of this election. They are also the prime beneficiaries of the mortgage interest deduction, so it seems obvious that maintaining this cornerstone of American housing policy should be among lawmakers’ primary goals.” Special thanks goes to Past NAHB President Shirley Wiseman for her efforts in achieving this good result.

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  • Joanne Loftus
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