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Nationwide Pending Home Sales Highest in 3-1/2 Years

Pending home sales have spiked nationwide. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in October, rose 3.7 percent over the previous month. The index has risen nine consecutive months, indicating the longest streak of gains since 2001. In fact, the Pending Home Sales Index surged a record 31.8 percent in October of 2009 from the same period in 2008.

A lot of people, especially new broadcasters, seem to be flaunting this news as a sign we are out of the recession and that the real estate market is predictably following recent stock market gains. Well, let’s look a little closer at the circumstances. Lehman Brothers filed for Chapter 11 bankruptcy on September 15th of last year. Utter shock and fear, not to mention huge portfolio losses, put prospective homebuyers on the sidelines and brought the real estate market to a screeching halt.The news rocked the real estate market to its core, so it is not a surprise that pending sales were extremely low in October 2008. Also, the original deadline for the first-time homebuyers’ tax credit was November 30, 2009. With an extension up in the air, first-time homebuyer flooded the market in September and October, trying to take advantage of the government benefit. The tax credit has since been expanded and extended, but I would expect another surge as we approach next year’s deadline. The above circumstances taken into account, I would be wary to conclude that we are out of the bushes.

One thought on “Nationwide Pending Home Sales Highest in 3-1/2 Years

  1. Jeff Persons says:

    Market bottoms are indeed hard to call. I was a stock market trader for a number of years before i got into real estate and In the stock market it seems that we put a bottom in when everyone has sold and given up. Once everyone has sold there are only buyers available anyway. Bottoms seem to come when everyone gives up on finding the bottom

    It would seem that the first wave of Boston real estate buyers coming in the spring will be very busy and maybe even set off a bit of panic buying, but the activity is being faked by the tax break incentive. I think this will be sold into by sellers who have been wanting to sell. This is why I have been saying that the 8K goes to the sellers in the end as they just jack up the price inside the flurry of demand.

    After the deadline has passed, we will see if we are running low on sellers. Once that happens, the demand is satisfied, the market has a chance to stabilize and move higher. This can take longer than anyone predicts and there is a possibility of the market languishing after the tax credit has expired and we could move lower in prices as well as transactions. This could go on for years but I’ve got to believe that the real estate market (barring any exogenous events like terrorism) will start to strengthen in 2010.

    It is a market however so who knows?

  2. Ryan Ward says:

    I don’t know if I want to be in the market of “calling” the bottom. Instead, these pending home sales show positive signs. I think that is a better way to put this. Forced forward by the tax credits passed by congress, more sales will beget lower inventory. Those forces together would bring us back into balance, but there are more forces acting on the real estate market than just those two.

    What we can say is it is getting better, not worse. Or at least for those areas that are still getting worse, it is getting worse at a slower rate that continues to decrease.

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