I know I've been absent from the blog for a little while, but I have great news. Pending home sales have been steadily increasing despite negative press.
Why are pending home sales important?
Well, pending home sales are those properties that have a contract on them and are waiting for mortgage comittment and/or closing. So, while these are not guaranteed to close, in all probability, they will. The Pending Home Sales Index gives us a clear picture of what is actually selling as opposed to merely what is up for sale. When you look at the amount homes for sale and the amount of homes about to sell (pending sales) you get a good look at supply and demand. When the gap closes, the market is good.
Check out the "related link" below to see what the National Association of REALTORs has to say.
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( 3 / 248 )Are prices dropping? Yes.
Is this bad? No.
Why? In a market like we're in right now, when prices drop homes sell. That's what we have been seeing in the last few months. For a while, there was very little activity and a lot of homes sitting there on the local market. With all of the bad news coming at us every day, no one wanted to make a move. The mortgage crisis was making it hard for the people who did want to buy to even get the financing that was available. What we've seen in the first quarter are the banks getting back to business, some daring people making offers on properties, and, yes, a good deal of homes going under deposit. The anomaly was this: In the Northeast, compared to the first quarter of last year, the amount of homes going under deposit was down by 30 percent while the actual sale price of those homes had increased in our area by a about 1 percent and change. Not a big increase but, given the circumstances of so many markets falling and so many forclosures, this was great. After the 8-10 percent drop over the last year and a half in home values in our area, sale prices leveling out would have been fortunate let alone an increase in sale prices.
There's the background. So what we have are the sale prices slightly increasing and the amount of sales more than slightly decreasing. What that tells me is that our market hasn't been hit so hard. It's more so been affected psychologically than physically. When people are worried about the market, they do not buy. Those, however, that did buy forced the sales price to rise slightly. You would think that in a market that is selling almost a third less homes would see a drop in prices to help it along. Well, in theory you're correct. Supply versus demand would tell you that with so many homes on the market, the prices should drop. In fact, they slightly did the opposite. Sure, plenty of listings reduced their price. Both of us have seen the "Price reduced" signs around. You can see that in a great market. What happens now?
Now, with mortgage rates still pretty low and prices at the lowest they've been since 2004, some people are starting to say it's a good time to buy. This is great. Reducing some of the stale inventory out there is the only way for the local market to truly rebound. It will help the public perception about the market when they begin to see homes sell. Most people take the same route to work every day. When they drive by a home, or more than a few homes that have been on the market "for a really long time", they're right to say that the market's suffering. When they start to see those homes sell, it will begin to change their thoughts about it.
We're on our way to a healing market. With other parts of the country showing similar trends as we have been fortunate enough to have here in our area, the nation's perception will begin to change. That's where the healing begins. Enjoy this video with S&P 500 Index Committee Chairman, David Blitzer. Thanks for the continued hits on my relatively new market blog and feel free to add comments to these entries or click on the "Contact Me" link on the top/right with questions you may have, topics you'd like me to cover, or just general feedback.
-Scott
Click on the link below for the video
http://video.msn.com/video.aspx?mkt=en- ... dd96140879
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( 2.9 / 334 )How has the credit crisis affected the housing market? Adding fuel to the fire, it makes a lot of people think it's a bad time to make a move. Furthermore, it makes it harder for many people who do wish to buy. Consider this: In our area, there is a huge traffic jam of houses for sale between $175,000 and $325,000. This is also an area where it's not the easiest time to get a loan. If you have perfect credit and a lot of money to put down on the home, then there isn't a problem at all. If you know a lot of these people, by all means pass my name along. The thing is that there isn't a lot of these people. What happens? How many people do you know with perfect credit and a huge down payment looking for a home in that price range? The homes sit there on the market, people watch them sit on the market, and that creates more ill will towards the market. It ends up being a self-perpetuating problem. This is more of that grinding to a halt, stand-off issue that I've been talking about.
There is no single correct answer to the country's housing woes. It has to be a synergy of different problems being solved and a positive general, country-wide, global, etc... feeling about it. The housing market is like the stock market in that perspective and publicity has such a big impact on it. One big thing that can help along the stagnant, negatively publicised market is for some positive news to come from the mortgage sector. Click on the link below to see what Paul Maidment, Forbes.com Editor, has to say... (if an advertisement comes up, look for the "Click here to skip this welcome screen" at the top/right)
http://www.forbes.com/video/?video=fvn/ ... _non060908
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( 2.9 / 292 )Hello everyone,
After seeing some hits on this very, very new blog, I wanted to say thank you very much for checking it out. I'm just getting started and I've been watching videos, reading articles, and compiling new topics. Please feel free to click on the "add comment" link below any of these entries and put up some of your thoughts. I welcome discussion here and I look forward to it. I also welcome your thoughts on how to make it better and what you would like to see. You can always click on the "Contact Me" link on the menu to the right to directly send me a message if you're a little shy about putting things up for everyone to see.
Thanks,
Scott
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( 2.9 / 275 )It's always good to see the inventory go down in times like this.
I've included a link and then my take on the article. Give it a read and come back to see what I have to say. I look forward to you posting your comments on it too.
http://online.wsj.com/public/resources/ ... NGM08.html
Here's the simple explanation:
Think of supply vs. demand. When there are a heck of a lot more homes for sale than there are buyers to buy them, the market is overinflated and it really works against everyone. It only works against the people selling, you say? Now, considering that most sellers are buying a new home and not just moving into a rent, it affects those sellers when they're buying. They can't buy if they don't sell and the sellers of the next home they were going to buy can't buy what they're moving into and so on (think domino effect but after the first one falls, the rest stay in place). What you get is a stagnant housing market that's the economic equivalent of a standoff and everything sits still. Not good. Seeing the inventory shrink a little means there is some motion in the right direction. Houses are selling and there is some progress there. This is one the first steps to healing the housing market.
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