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.