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Browsing Posts tagged Pending Home Sales

Pending Home Sales (May 2009 - November 2010)The housing market continues to expand, and surprise.

According to the National Association of REALTORS®, November’s Pending Home Sales Index gained 3 percent from October. A “pending home sale” is a home under contract but not yet closed.

The index is now at its highest point since April 2010’s federal tax credit contract expiration deadline.

If the tax credit really did “borrow” sales from the summer months, as has been theorized, housing has rebuilt its foundation.

We know this because, of all the housing data available to  homeowners and home buyers, the Pending Home Sales Index stands apart as a forward-looking report — its designed purpose as described in its methodology.

Because 80% of all homes under contract close within 60 days, and a statistically significant share of the rest close within months 3 and 4, the Pending Home Sales Index is an excellent predictor of future Existing Home Sales data.

This is in contrast to the New Home Sales data and Case-Shiller Index, as examples, which both describe the real estate market as it existed two months in the past. The Pending Home Sales Index reports on housing as it exists right now. We should expect January’s Existing Home Sales report, therefore, to show marked strength, consistent with a housing market recovery.

The downside of the Pending Home Sales Index is that it’s a national report and real estate is not sold nationally — it’s sold locally. To get a feel for your home market and how it’s faring, talk to a licensed real estate agent with access to local home sale data.

If pending sales data is available, so much the better. Forward-looking figures can be more helpful than data that’s already old.

Pending Home Sales (Apr 2009 - Oct 2010)The Pending Home Sales Index surged 10 percent in October as low mortgage rates and low home prices spurred buyers into action.

A “pending home sale” is an existing home under contract to sell, but not yet closed. The Pending Home Sales Index is at its highest level since April 2010 — the contract deadline date for this year’s federal home buyer tax credit program.

The jump may also explain why home builder confidence is rising even as the number of new homes sold fades. Builders are seeing buyers’ renewed interest in housing first-hand and expect the next 6 months to be dramatically better.

On a regional basis, gains in October’s Pending Home Sales Index varied as compared to September. The Midwest led the charge, and the West was the laggard.

  • Northeast Region: +19.6%
  • Midwest Region : +27.3%
  • South Region : +7.1%
  • West Region : -0.4%

Home buyers should take last month’s Pending Home Sales Index to heart. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days, so we can reasonably expect November’s and December’s existing homes sales data to be similarly strong.

In other words, the housing market is heating up and may have already shifting toward sellers. Changes like that lower buyer leverage, and increase the cost of homeownership. Coupled with rising mortgage rates, the shift is even more defined.

The best time to buy a home this year may have already passed. The next best time may be right now.

Talk to your real estate agent if you’re planning to buy a home in 2011. It may be smart to move up your time frame.

Pending Home SalesAfter 3 straight months of improvement, the Pending Home Sales Index slid lower in September. As compared to August, September’s reading fell 2 percent.

A “pending home sale” is a home under contract to sell, but not yet closed. The data is drawn from a combination of local real estate associations and national brokers, and represents 20 percent of all purchase transactions in a given month.

Because of the large sample set, and because 80 percent of homes under contract close within 60 days, the Pending Home Sales Index is a terrific future indicator for the housing market. A high correlation exists between the Pending Home Sales Index and the NAR’s monthly Existing Home Sales report issued two months hence.

Expect home sales to idle into the New Year, therefore.

For home buyers in , this is good news. Over the last two months, housing markets have overwhelmingly favored home sellers.

Consider than, since June, the volume of both new home sales and existing home sales has increased, causing the available home inventory to fall by months. Meanwhile, helped by low interest rates, demand from buyers has remained relatively stable.

As with everything in economics, falling supply with constant demand leads to higher prices.

Therefore, the Pending Home Sales Index’s fading September figures suggest a more balanced supply-and-demand curve in the months ahead, a move that should suppress rising home prices and shift negotiation leverage back to the buy-side.

So long as mortgage rates remain rock bottom, the autumn season is looking like a terrific time to buy.

So according to this article, prices are set to rise.  But if you look at regional data, then it doesn’t apply to us.  And what we really need to look at is local data.  Does anyone think the market at Lake Winnipesaukee is the same as the market in Brockton?  Read on….

Pending Home Sales (Feb 2009 - August 2010)Consistent with calls of a housing rebound, the Pending Home Sales Index rose again in August. It marks the second straight month of improvement after May’s post-tax credit drop-off.

A “pending home” is an existing home under contract to sell, but not yet closed.

According to the National Association of REALTORS®, 4 out of 5 pending homes close within 60 days, and many more close within 90 days. For this reason, the Pending Home Sales Index is an excellent forward-indicator for housing.

As a real-life illustration, after July’s 27% plunge to an 11-year low, Existing Home Sales recovered 8 percent in August. This was not a surprise, though, because July’s Pending Home Sales Index predicted it.

Region-by-region, the Pending Home Sales Index varied in August, suggesting better sales levels in the South and West markets:

  • Northeast : -2.9% from July
  • Midwest : +2.1% from July
  • South : +6.7% from July
  • West : + 6.4% from July

That said, real estate markets aren’t “regional” — they’re local. Just as there are improving markets within the Northeast Region, there’s worsening markets in the West.

Overall, buyers are being drawn into housing by low mortgage rates, affordable homes, and ample supply. If the August Pending Home Sales Index is foreshadowing the fall housing market, home prices appear slated to rise.

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.