Pending Home Sales January 2009-July 2010Just one week after reports of Existing Home Sales and New Home Sales plunging, the housing market is signaling that autumn may fare better than did summer.  Talk about a see-saw!  (for those of you under40, which is most of you, that was a child’s ride that went up and down.  It was powered by children pushing with their legs.  And don’t laugh.  I recently had to explain to an employee what a typewriter was and what carbon copy meant.   And if you don’t know either, then please don’t ask me.  I’ll just get depressed.)

The number of homes under contract to sell rose 5 percent in July.

The data comes from the July Pending Home Sales Index, as published by the National Association of Realtors®. By definition, a “pending home sales” is a home that is sold, but not yet closed.

Historically, 80% of such homes close within 60 days which makes the Pending Home Sales Index an excellent, forward-looking indicator for the real estate market.

Indeed, the nationwide drop in home sales this summer was foreshadowed by the Pending Home Sales report.  The index dropped 30 percent in May. Then, two months later in July, it was shown that Existing Home Sales volume dropped 29 percent.

That’s a strong correlation.

Now, to be fair, the July Pending Home Sales Index is still relatively low; the second-lowest on record and well below last year’s numbers. But, the tick higher last month shows how housing may be stronger than than what the headlines report.

It appears that buyers took advantage of rising inventory, cheap financing, and stagnant prices, and pushed the market forward. We should expect similarly promising numbers when September’s Existing Home Sales data is released.