Over the past couple of years, most Americans who own homes have been dismayed to see their home values falling. In some cities the losses in value were mild, but in some areas of California, Nevada, Arizona, and Florida, among other states, declines have exceeded 40%. Foreclosures have been steadily climbing in spite of government intervention to slow the wave of lost homes, and banks have seen their capital bases decimated as they took massive losses thanks to homeowners that were no longer able to pay their mortgage.

The housing market has played a big role in this recession, but it’s finally showing signs of recovery. Data released for the month of April saw pending home sales increase by 8.6% compared to a month earlier. Economists had expected the increase in pending sales to be a modest 0.5% so this number really shocked people. It was the biggest monthly jump in pending sales in more than 8 years and represents the third consecutive month that pending home sales have increased.

Coupled with the fact that construction spending has been on the rise over the past few months, it seems that the housing market is at least on its way to becoming somewhat stable again. This trend is good for a number of reasons.

First, for sellers, it means that houses that may have been sitting on the market for months may finally start moving again. The glut of inventory in the housing market is a big reason prices declined so heavily-there were plenty of sellers, but very few buyers and even fewer buyers who qualified for financing. Second, for buyers, it shows the credit is loosening and mortgage loans are becoming easier to obtain as banks begin lending again. Finally, for the economy in general, the trend of increasing pending home sales will bring increased confidence to consumers, and economic growth is driven by consumer spending.

Home values are still lower than most sellers would like for them to be, but the signals represented in these numbers suggest that better times are on the horizon for the housing market. True recovery will take time, but the housing market seems to be taking at least some baby steps in the right direction.

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Tags: financing, housing market, mortgage, pending home sales

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