Pending Sales Index Predicts Future of Home Sales

According to the National Association of REALTORS®, on a seasonally-adjusted basis, the Pending Home Sales Index fell 1 percent in August.

The Pending Home Sales Index measures homes under contract, but not yet sold, nationwide. In this respect, the Pending Home Sales Index is a forward-looking housing market indicator; a predictor of future home sales.

It’s one of the few national indices that “looks ahead” to future market conditions. Most housing data, by contrast, describes past events.

On a regional basis, only the South Region showed improvement in August’s Pending Home Sales Index report :

• Northeast Region: -5.8%
• Midwest Region : -3.7%
• South Region : +2.6%
• West Region : -2.4%

Regional Data Doesn’t Always Match Up with Local Data

That said, even the value of regional data can be questioned. Like all things in real estate, the number of homes going under contract will vary on the local level.

For example, in the Northeast Region where pending home sales slipped in August, there are close to a dozen states. Some of those states performed better than others, and there is no doubt that cities and towns exist in the region in which pending home sales actually climbed.

As a national/regional report, the Pending Home Sales Index cannot show local market data and, for that reason, it’s somewhat irrelevant to everyday buyers and sellers in Urbandale. If you’re in the market to buy or sell a home today, it’s your local housing market data that matters to you.

We watch the Pending Home Sales Index because it paints a broad picture of housing nationwide. To get local market conditions, though, you’ll want to talk with a local real estate professional.

Rates Continue to Hold at All Time Lows

According to the National Association of REALTORS®, Existing Home Sales nationwide fell to 4.67 million units on a seasonally-adjusted annualized basis last month. It’s the fourth straight month below the 5 million mark, and the report’s lowest reading since November 2010.

An “existing home” is a home that’s been previously occupied or owned.

In addition, the Existing Home Sales report showed home supplies rising nationwide. At the current pace of sales, in other words, the complete, national “For Sale” inventory would be exhausted in 9.4 months. This, too, is the worst reading since November 2010.

On a units basis, however, the number of homes for sale actually fell in July. As compared to June, home resale inventory dropped 65,000 units to 3.65 million.

It’s a Great Time to Look at Your Options

From these figures, we can infer that, despite low mortgage rates and lagging home values, buyer activity is slowing in Iowa and nationwide. This may be seasonal, or it may be a long-term trend.

Either way, there’s opportunity for today’s home buyers.

With mortgage rates at all-time lows, home affordability is peaking. More households can afford housing payments than during any time in history and with the fall season approaching, buyers in Urbandale may find contracts negotiations to be more “friendly”.

This can mean lower sale prices and larger concessions from sellers — the hallmark of a Buyer’s Market.

It’s a good time to look at your options. Talk to your real estate agent and see what’s out there for you. Low home prices may persist, but low mortgage rates likely won’t.

Home Supply Continues to Rise

Home resales slipped for the 3rd straight month, according to data from the National Association of REALTORS®.

The Existing Home Sales posted a 1 percent drop from May as the number of homes sold fell to a seasonally-adjusted, annualized 4.77 million units. It’s the monthly report’s lowest reading since November 2010.

The report also showed the national supply of homes for sale rising to 9.5 months — also its highest reading since November 2010.

Home Supply is the amount of time it would take to exhaust the complete home inventory at the current pace of sales.

June’s Existing Home Sales data would have been stronger if not for a high contract cancellation rate. As compared to May’s 4 percent rate, June’s cancellation rate was 16 percent; an elevated figure that “stands out in contrast” to what’s typical, according to the REALTOR® trade group.

By region, home resale activity varied:

• Northeast : -5.2% from May
• South :+0.5% from May
• Midwest : +1.0% from May
• West : -1.7% from May

Real Estate is Local

This disparity from region-to-region highlights an important housing market concept. Namely, that all real estate is local. Because just as the Existing Home Sales varies on a regional level, it varies on a state-wide level, too.

What’s true for California housing is not necessarily what’s true for Florida housing, for example. Each of the 50 states has its own trends, and within those 50 states, there are thousands of cities and neighborhoods, each with their own trends, too.

The “national housing market” doesn’t exist, so national data is rendered somewhat useless.

For data in Des Moines or your local market, talk to your real estate agent.

Pending Home Sales Jumped 8% in May

According to data from the National Association of REALTORS®, the Pending Home Sales Index smashed analyst expectations, jumping 8 percent on a monthly basis in May.

Wall Street calls were for an increase of just 0.5 percent.

It was a surprise result that, coupled with the recent stronger-than-expected New Home Sales and Existing Home Sales readings, has sparked housing market optimism in Iowa and nationwide.

The biggest reason for the optimism is because of what the Pending Home Sales Index measures.

In contrast to “traditional” housing data which reports on how housing performed two months ago, for example, the Pending Home Sales Index is a forward-looking indicator; a predictor of future market activity based on freshly-written contracts between buyers and sellers.

Sales Expected to Continue their Rise During June & July

In other words, the Pending Home Sales Index looks ahead — not back. This is reflected in its methodology which states that 80% of homes under contract close within 2 months, and a large percentage of the rest close within Months 3 and 4.

Because May’s Pending Home Sales Index rose sharply, therefore, we can expect similar jumps in the Existing Home Sales figures of June and July.

For housing and home prices, this is a positive but the gains won’t apply to each home equally. The Pending Home Sales Index is still a national report for a market built on local sales. What’s happening on your particular street in your particular neighborhood may not reflect what’s happening somewhere else.

For accurate, real-time data in your local market, ask a real estate agent for statistics.

Pending Home Sales Took a Dip in April

Hurt by foul weather and a soft market, the Pending Home Sales Index plunged 12 percent in April.

The monthly index is published by the National Association of REALTORS® and measures the number of homes on which new contracts have been written.

It’s the association’s lone “forward-looking” report; meant to predict future, closed home sales. 80% of homes under contract close within 2 months.

Therefore, if the April Pending Home Sales Index is accurate, we should expect home sales to decline through June and July.

On a regional basis, “pending homes” varied. The Northeast Region posted growth. None others did.

• Northeast Region: +1.7% from March
• Midwest Region : -10.4% from March
• South Region : -17.2% from March
• West Region : -8.9% from March

Housing Market is Local

But even regional data remains too broad to be useful to everyday buyers and sellers in the Ankeny market. Housing is local and that means that each block, of each street, in each city has its own market and economy. Grouping 9 states into a single “region” is neither helpful nor relevant.

That said, we can’t ignore the data in its entirety.

Housing is believed to be a key component in the nation’s economic recovery. Fewer home sales will retard growth, and slower growth leads mortgage rates down.

Home Affordability hit record-highs last quarter, and should do the same in this one. Homes now sell at discounts to prior prices and mortgage financing is cheap. Buyers tend to be drawn to favorable markets such as this, and that will pressure home prices higher.

If you’re in the market for a home today, conditions look good. Talk to your real estate agent to gauge your options.

The Lowest in 24 Month Span

Single-family housing starts plunged unexpectedly last month. Nationwide, starts fell 12 percent from the month prior; and 29 percent from February of last year.  Yowsas!

February’s figures represents the worst 1-month drop in housing starts since May 2010 — the month that followed the expiration of last year’s federal home buyer tax credit — and puts single-family housing starts at a 24-month low.

In addition, single-family Building Permits plunged last month, too, shedding 9% from January. A building permit is a local government’s certification and approval to begin home construction.

Housing permits are an excellent forward-indicator for the housing market. This is because 93 percent of homes start construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

Sellers Regain Leverage

For home buyers in Iowa looking at new construction or existing homes, this news should create a sense of urgency.

Home prices are based on supply and demand and overall home supply looks headed for a fall. Plus, with mortgage rates retreating and homebuilders projecting higher sales this summer, buyers may face rising home prices before long.

Sellers look poised to regain negotiation leverage.

For now, though, home affordability remains high with properties inexpensive and mortgage rates still low, historically. If you plan to buy a home in 2011, the February 2011 Housing Starts data may be reason to move up your time frame.

With home supplies dropping, prices are likely to rise.

Are you looking at buying a house?  Awesome!  I can help you with that.  Send me a quick email or call me at the number on the right and I can help you make sure your bases are covered on the deal!

Consumer Confidence at an 8 Month High

The Pending Home Sales Index climbed 2% in December, according to the National Association of REALTORS®. A “pending home sale” is an existing home under contract to sell, but not yet closed. It’s *very* IMPORTANT to know the clarification.

Pending Home Sales are up for the fifth time in six months. The December reading is now its highest since the federal home buyer tax credit’s April 2010 contract deadline, and the figure is well north of the Pending Home Sales Index 3-year average.  That’s obviously a good little nugget of news.

Coupling this data with December’s strong Existing Homes Sales report (+12%) and its strong New Home Sales report (+17%), it’s clear that the housing market has past its trough and is in Recovery Mode.  I’m not sure I’m absolutely convinced, but the traders seem to be.  That’s what counts.

Even consumer confidence is at an 8-month high.

On a regional basis, December’s Pending Home Sales Index varied as compared against November. The South region led the way, and the West region lagged.

• Northeast Region: +1.8%
• Midwest Region : +8.0%
• South Region : +11.5%
• West Region : -13.2%

Competition for Homes Will be Higher this Spring

Home buyers in areas such as Beaverdale would do well to study last month’s Pending Home Sales Index. It offers clues of what to expect during the spring buying season. For example, according to the National Association of REALTORS®, 80 percent of homes under contract close within 60 days.

Therefore, we can look at the December Pending Home Sales Index and project, with a high level of confidence, that home sales will be higher throughout February and March on a units-basis.

Furthermore, because the Existing Home Sales and New Home Sales reports show that housing stock is falling nationwide, spring buyers in Des Moines will notice find more competition for the available housing stock. As the Supply-and-Demand curve shifts towards sellers, home prices will rise.

In other words, there’s no rush to buy a home, but as the year progresses, home prices are expected to rise, as are mortgage rates.  This one-two combination will impact home affordability negatively.  And the higher that mortgage rates go, the worse the damage.  Expect it to happen. It will.

Your home-buying dollar won’t go as far in 2011′s second half as it will go right now. If you have plans to buy a home in 2011, consider moving up your time-frame.

If you’re in the market to purchase a house and need to get pre-approved, give us a shot.  We’d be happy to help you out!

Real Estate is Local/Regional

Existing Home Sales dropped in May for the first time in 3 months but still managed to post its second-highest since November 2009, promoted by the expiring federal tax credit program.

An “existing home” is a home that cannot be considered new construction; a resale of an existing home.  Existing Home Sales fell 2.2 percent in May.

The press is calling the drop in sales unexpected and disappointing, but a deeper look at the data shows the news isn’t as bad as it first appears.

First, on a regional basis, sales were mostly solid. Only the Northeast region posted a loss. The West even managed a gain.

• Northeast : -18.3 percent
• Midwest : 0.0 percent
• South : +0.5 percent
• West : +4.9 percent

Second, the supply of homes for sale dropped to 8.3 in May and, because home prices are based on supply and demand, this is a positive for pricing.

By comparison, in 2008, the average existing home inventory was 10.4 months.

And, lastly, in May, first-time home buyers represented 46 percent of all buyers. The number was likely buoyed by the tax credit program but that doesn’t damper the fact that first-time buyers provide a support floor for the housing market.

First-time buyers in Urbandale enable “existing owners” to move-up to bigger homes, which, in turn, trickles up to the mid-size and jumbo markets.

Analysts expected more from May’s numbers and that may explain why the reaction to the data is generally negative.  However, in many cities, home resales did just fine.

If you’re considering making a home purchase, let us know!  We’d be happy to help out.

So, What’s a Pending Home?

First off, 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.  Offer’s written, now it’s up to the mortgage approval, appraisal and inspection.

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% 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.  But, you already knew that.

Home Supplies Drop and Prices Go Up

That said, March’s surge in sales is being felt on the street.  And, we’re not talking about Wall Street

Home buyers in Urbandale no doubt noticed the change in activity. Around the country, multiple offer situations were more common last month and “right-priced” homes tended to go under contract very 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 Beaverdale.

Today’s buyers should consider making an offer sooner rather than later.  Looking at the information, it appears the best time to have found a “deal” on a home may have been in February.  Don’t let that discourage you though, the buying’s still good!

If you need help, feel free to call (contact information on this page) or email me!  I’d love to help you out.

Consumer Confidence is at a Two Year High

Consumer Sentiment has been on the rise since last February and it’s something to which Des Moines home buyers should pay close attention.

The affordability of your next home may hinge on consumer confidence.  Weird, right?

As the economy recovers from a near-recession, many of the elements of a full recovery are in place.  Business investment is starting to show returns. household spending is increasing, and financial systems are gaining strength.

What’s missing from the recovery, though, is jobs growth.  Another net 20,000 jobs were lost in January. Data like that hinders economic growth.

With that said, twenty-thousand jobs lost is a much better figure than the several hundred thousand that were shed per month throughout early-2009.  But, keep in mind it’s still a net negative number.  Not only does household income drop when Americans lose jobs but so does the average American’s confidence in his or her own economic future.  It’s truly scary stuff.

Wall Street is Paying Close Attention

This is one reason why jobs growth is so closely watched by Wall Street — jobs are generally linked to higher confidence levels.  People believe that confidence spurs consumer spending.

Consumer spending represents 70% of the U.S. economy.

As confidence rises, it could be good news for the economy, but bad news for home buyers. More spending expands the economy and, all things equal, that leads mortgage rates higher.

Same for home prices. More confidence means more buyers which, in turn, squeezes the supply-and-demand curve in favor of sellers.

Later this morning, the University of Michigan will release its February Consumer Sentiment survey. If the reading is higher-than-expected, prepare for mortgage rates to rise and home affordability to worsen.

If you’re wondering what mortgage rates are doing, you’re not alone.  If you’d like to have more “hands on” attention to your mortgage shopping experience, I am currently taking new clients.  Feel free to email me and we can discuss your loan options.  Rates fluctuate, but we take a lot of the uncertainty out of the mortgage process.