by Nicole Jones

Created on: June 04, 2010

While not the best of times for real estate, it is far from the worst after what the industry suffered through in recent years.  According to the National Association of Realtors, the number of consumers who signed contracts to buy homes in March jumped more than experts expected. The NAR report of its seasonally adjusted index of sales agreements for previously occupied homes showed a 5.3 percent month-to-month increase (from February to March).

Whether the news is truly a sign of a slowly recovering economy or more just the positive impact that government incentives are having on the U.S. residential real estate market over the first quarter of 2010 is debated by experts. 

The federal government incentives, which ended April 30, offered first-time buyers a significant tax credit: 10 percent of the purchase price, with a cap of $8,000. There were also incentives for non-first time buyers: a tax credit of 10 percent, with a cap of $6,500, for current homeowners who buy and move into a new house.

Meaning, it had to be a primary residence and not a second or vacation home. Both incentives are credited with giving sales a big boost over the first three months of the year.

But to qualify, the real estate deals had to be signed by April 30 and now some experts are warning that sales in the coming months will decline sharply. Dan Greenhaus, an analyst for the trading firm Miller Tabak, noted, “Strength in the spring was all but certain. A slump following the credit’s expiration is likely although the exact timing is difficult to predict.”

Other analysts worry that if mortgage interest rates rise or if another wave of foreclosures occur, that real estate prices will once again drop. However, if the unemployment continues to decrease, then that could shore up the real estate market and keep it stable.

March’s numbers for pending home sales were the highest since October of 2009. Compared to March 2009, when the real estate market was hitting rock bottom, they reflect a 21 percent increase.

Just why the U.S. residential real estate market came to the edge of collapse was actively investigated by Congress and the Justice Department last week. A senate panel grilled Lloyd Blankfein, the CEO of Wall Street giant Goldman Sachs, over the company’s actions regarding subprime mortgages.

The Senators were looking into allegations that Goldman failed to tell investors that the securities it was selling were at very high risk of default

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