March Pending Home Sales Point To Stronger Spring Market

The Pending Home Sales Index moved higher in March as home sales were spurred by low mortgage rates and an expiring tax credit.

A "pending home" is a property that is under contract to sell, but not yet closed.
March marks the second straight month in which the Pending Home Sales Index improved after a series of weak showings this past winter.
March showed a 5 percent increase over the month, but the Pending Home Sales Index is still off its October 2009's peak.  October 2009 is a comparable period to March 2010 in that it marked the 1-month deadline before the home buyer tax credit's initial expiration date. The credit was later extended to April 2010, of course.
That said, March's surge in sales is being felt on the street.
Home buyers in Philadelphia no doubt noticed the change in activity. Both locally in our company and around the country, anecdotally, multiple offer situations were more common last month and "right-priced" homes tended to go under contract quickly.

The increase in March's Pending Home Sales is diminishing the nation's home supply which, in turn, should cause prices to rise in most markets -- including Philadelphia and surrounding counties including New Jersey.

Today's buyers should consider making an offer sooner rather than later.  We will probably see the trend continue as activity in the month on April as measured by our firm was even higher than in March, but for an  offical number, we'll  have to wait until next month. But looking at the data, it appears the best time to have found a "deal" on a home may have been in February, when snow kept many homebuyers off the streets, giving the hardy souls who braved the weather a competitive edge.

Pending Home Sales Predicts A Stronger Spring Market

After the snow storm this weekend, its hard to think about the spring market, but that is what we're entering, and the condition of the market is of interest to potential home buyers and sellers in Philadelphia and Surrounding areas. One of the indicators is the Pending Home Sales Index which rose slightly in December, climbing 1 percent from November.

A Pending Home Sale is a home that is under contract to sell, but not yet sold. It's a figure compiled by the National Association of Realtors® using sales data from over 100 regional listing services and more than 60 large brokerages around the country.

Because each pending sale is a true measure of sales activity, the Pending Home Sales Index is purported to be the most reliable forward-looking indicator for housing.

Recent data supports this hypothesis.

After Pending Home Sales plunged 16 percent in November, Existing Home Sales fell by 17 percent in December. Based on the most recent Pending Sales Index, therefore, we can expect January's closed sales to be similarly level.

For home buyers in Philadelphia and Palmyra , this is all a bit of good news. Home prices are based on the supply-and-demand balance that exists between buyers and sellers. When buyers outnumber sellers, like they did through most of 2009, home supplies dip and, in fact, the national home inventory nearly halved during the 12 months ending November 2009.

With fewer homes for sale, multiple-offer situations were almost commonplace and home values rose as result.

Activity has since slowed, however, and fewer buyers are in today's market. The supply-and-demand equation has shifted back some. In December, home supplies rose for the first time in 7 months and January will likely show the same.

The net result: Home buyers have more homes from which to choose and that can create negotiation leverage for better prices and better concessions. As people begin to take advantage of the remaining time for the home buyer tax credit though, we have been seeing activity start to increase in our offices.

With mortgage rates still low and a looming deadline on the homebuyer's tax credit, market activity should be strong between now and April. Take your time and bid right. And when you're ready, be ready. The best deals likely won't last.

Home Buyers Get A Green Light : Pending Home Sales Plunge In November

Just one month after touching a 3-year high, the National Association of Realtors® Pending Home Sales index plunged in November. A "pending" home sale is a home that is under contract to sell, but has yet to close.

The 16 percent drop marks the first retreat in Pending Home Sales since January of last year.

The weak Pending Home Sales data is an indication that Existing Home Sales data will be soft this month. This is because, historically, 80 percent of Pending Home Sales convert to "closed sales" within 60 days, and most of the rest close within 120.

Even with Pending Home Sales down, the Philadelphia housing market should not lose much of its momentum. For today's home buyers, this "lack of slack" can represent both a concern and a terrific opportunity. Though the weather keeps some buyers inside, the tax credit provides a real incentive to get out and participate in the market. Acting now allows you to get a financial benefit and to deal with sellers who have possibly held their homes into the winter.

Home prices are a function of supply and demand; of buyers and sellers. When buyers outnumber sellers, competition leads to bidding wars, ultimately, and higher home prices overall. The imbalance can also create a sense of urgency that results in over-paying for a home.

When buyers are sparse, on the other hand, the psychology of real estate shifts.

Home sellers are keenly aware of foot traffic and requests for second and third showings. Without buyers, their homes can't sell. They also note a lack of general feedback from the market.

It's at this point that seller fear can creep in and it becomes a buyer's best time to buy.

Based on November's Pending Home Sales data, it's clear that home sellers are in abundance right now. Home buyers have leverage.

It may not last.

With mortgage rates easing lower this week, the federal home buyer tax credit still in effect, and the Holiday Season officially over, buyers are getting back to business in Mount Holly and everywhere.

Plus, with the tax credit deadline of April 30, 2010 fast approaching, buyer activity should increase over the next 4-6 weeks.

The market looks ripe for a buy but don't rush it. Take your time and bid right. But when you're ready, be ready -- once the market momentum shifts back to sellers, you might lose all that leverage you built up through the winter.

Home Buyers are Coming Out !

A real estate trade group reported Tuesday that Pending Home Sales ticked higher in December 2008. A "pending home sale" is a home under contract to sell, but not yet closed.

The group positions Pending Home Sales report as a predictor of future activity, suggesting that home sales will spike 60 days hence.

This is good news for the economy.

However, despite the Pending Home Sales report's correlation to the actual number of homes sold in the future, that connection may not be the report's best use. This is because of what Pending Homes Sales doesn't measure.

Specifically not included in Pending Homes Sales are:

1. Sales of new construction homes
2. Sales of For Sale By Owner properties
3. 80 percent of non-surveyed MLS transactions

And, lastly, it should be noted that Pending Home Sales tracks contracts -- not closings -- and until a home is sold and closed, nothing has really happened in the economy. That's especially relevant in a market like this in which finding financing isn't always so easy.

Pending Home Sales still has its place, though, because it's a terrific look at the current buy-side demand for homes. Clearly, low mortgage rates and falling home prices are making an impact and this is why the December's Pending Home Sales report is so important. It's the third housing report this month that shows the demand for homes rising while the supply of homes falls.

The other two reports:

1. The number of "used" homes sold monthly is rising
2. The number of new homes being built are falling

This is good news for home sellers and for the economy. As the existing inventory shrinks the value of the remaining inventory stabilizes and then increases. nd in an area like Philadelphia, where the prices have not been dramatically reduced, the benefot is even greater. If housing is expected to lead the U.S. out of recession, the seeds for that recovery may have already been planted.

(Image courtesy: The Wall Street Journal)

Pending Home Sales Jump!

Buyers are returning to the housing market.

Each month, The National Association of REALTORS^® tracks homes under contract to sell, but whose closing has not yet happened.  It calls them "pending sales" and publishes a monthly report to quantify them. 

The Pending Home Sales report is important because it's meant to predict future home sales activity.  History shows that 80 percent of homes under contract will "close" within 60 days, and most of the rest will close within 120 days. 

If Pending Home Sales are up, it's believed, actual home sales will be up, too.

In August, Pending Home Sales jumped 7 percent from the month prior, returning to levels not seen in over a year.

The report's strength suggests that buyers are returning to the housing market, continuing the trend that started in March.  This is tremendously good news for sellers because more buyers on the hunt means more demand for homes which, in turn, leads sale prices higher. 

The Pending Homes Sales report is not a perfect predictor, however.  For one, it's not measuring an actual sale -- just the expectation of one.  In addition, it only accounts for "used" homes, ignoring new construction. 

But that aside, the strong uptick in August tells us that home buyers are re-engaging at a quickening pace and finding that "now" is a good time to buy real estate.  When buyer demand rises, the real estate market as a whole isn't usually that far behind.

(Image courtesy: The Wall Street Journal Online)