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August 7th, 2008 11:59 AM by David W. Welch
The Pending Sales Index unexpectedly jumped more than 5% in June with the greatest increase coming in the South. This was reported today by Reuters. The pending sales in Orlando have been rising since January, but July actually had slightly fewer contracts written than June. Higher oil and gas prices are holding the economy back, with Wal-Mart even taking a bit of a hit. I believe the Fed will probably hold interest rates steady through the end of the year if this continues. This could effect mortgage rates by keeping them about where they are right now. Inflationary concerns though could still put some upward pressure on rates wiping out some of the price declines.
Here in Orlando we are still seeing a slight decline in the available inventory of homes for sale. Combined with somewhat recovering sales numbers and the building slowdown, the months of inventory has steadily declined since the beginning of the year. Builder inventories are down to about a seven month supply. Typically a six month supply is considered to be in balance with demand. I am looking for the new home supply to continue to decline with fewer housing starts. Overall though, the supply of homes for sale is about three times what it should be in a balanced market. Unless there is an increase in demand or a sudden drop in the inventory, we will be working through this for a while to come.