A hope that improvement in demand will help stop the decline in prices this year has been given new life as an index that follows contracts to purchase previously owned homes increased two percent in January over the previous month – marking the highest level since April of 2010.

Real estate professionals are worried about tightened lending practices and buyers failing to meet these new standards.

According to the National Association of Realtors (NAR), the index that tracks pending home sales (deals that have signed contracts, but remain to be closed) rose from around 90 a year ago to 97 this year.

Although buyer traffic has increased, real-estate firms are still unsure as to whether buyers are actually going to fulfill purchases. Part of the concern is that the first couple of months last year were strong, but spring and summer were only a disappointment.

Real-estate agents warn of other reasons to be cautious. For example, many contracts are falling apart at the closing table. Too, lending standards continue to be tight, disqualifying some buyers from loans.

A more real concern is that appraised values tend to come in below the sales price that is agreed upon, which forces the buyer to lower the price or the seller must make a larger down payment in order to hold the deal together.

Mortgage rates continue to look great, currently at one percentage point below their levels of last year; however, applications for home-purchase remain dismal – down 10% from last year in mid-February.

Some housing experts say that a boost in sales might not be obvious because investors and other all-cash purchasers are playing a larger role in many of the most distress housing markets over the past year.

Policy makers have ramped up efforts to aid ailing housing markets in recent weeks. For example, Fannie Mae’s regulator said it would start to accept bids on over 2,000 properties from investors in different regions with the aim of converting some foreclosed properties into rental units.

See also:
B of A and Fannie Mae not on best of terms
Elimination of Fannie Mae and Freddie Mac
Reforming Fannie and Freddie