Pending Home Sales vs. Existing Home Sales

By
Real Estate Broker/Owner

With all of the talk about the recent strength in pending home sales over the past couple of months, there continues to be a headwind-effect between pending contracts and actual existing sales that are reported by the NAR. 

The relationship between the two indicators has revealed that pending home sales appear to be taking a longer time to close, more like 60 days rather than 30 days, and a smaller percentage of the total pending contracts are actually making it to a successful close.

This attrition rate could be attributed to a couple of influences including the new appraisal HVCC guidelines, the complexities of short sales or bank sales that often times are unsuccessful, as well as strict loan underwriting.  Additionally, as Jim Crawford with REMAX points out, some of the pending contracts are actually lease-purcahse contracts which may never close.

Here is the relationship between the NAR's pending index and existing home sales over the past several months: 

October 2008 Pending Index -0.7% / November 2008 Existing Home Sales -8.6%

November 2008 Pending Index -4.0% / December 2008 Existing Home Sales +6.5%

December 2008 Pending Index +6.3% / Janaury 2009 Existing Home Sales -5.3%

January 2009 Pending Index -7.7% / February 2009 Existing Home Sales +5.1%

February 2009 Pending Index +2.1% / March 2009 Existing Home Sales -3.0%

March 2009 Pending Index +3.2% / April 2009 Existing Home Sales +2.9%

April 2009 Pending Index +6.7% / May 2009 Existing Home Sales +1.3%

May 2009 Pending Index +0.8% / June 2009 Existing Home Sales +3.6%

June 2009 Pending Index +3.6% / July 2009 Existing Home Sales ???

What this relationship reveals is that while there is no question that home sales have at least bottomed for the near term, the robust growth in pending home sales over the past five months has yet to translate into robust closed sales.

 

 

 

Comments (2)

Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

In Atlanta, we recently found that many of these "Pending Sales" are really 'Lease Purchase' agreements!  They will never close!

Aug 12, 2009 02:01 AM
Mark MacKenzie
Phoenix, AZ

Jim,

I added a link to your blog in this post, I hope you don't mind. :)

Aug 12, 2009 02:27 AM