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Pending Home Sales Shows That More Buyers May Be Shopping For Homes Than You Thought

October 9, 2008 by Scott Kinne

Buyers are returning to the housing market.

Each month, The National Association of REALTORS® tracks homes under contract to sell, but whose closing has not yet happened. It calls them “pending sales” and publishes a monthly report to quantify them.

The Pending Home Sales report is important because it’s meant to predict future home sales activity. History shows that 80 percent of homes under contract will “close” within 60 days, and most of the rest will close within 120 days.

If Pending Home Sales are up, it’s believed, actual home sales will be up, too.

In August, Pending Home Sales jumped 7 percent from the month prior, returning to levels not seen in over a year.

The report’s strength suggests that buyers are returning to the housing market, continuing the trend that started in March. This is tremendously good news for sellers because more buyers on the hunt means more demand for homes which, in turn, leads sale prices higher.

The Pending Homes Sales report is not a perfect predictor, however. For one, it’s not measuring an actual sale — just the expectation of one. In addition, it only accounts for “used” homes, ignoring new construction.

But that aside, the strong uptick in August tells us that home buyers are re-engaging at a quickening pace and finding that “now” is a good time to buy real estate. When buyer demand rises, the real estate market as a whole isn’t usually that far behind.

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Scott Kinne

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Vice President, Senior Loan Officer
NMLS ID #182351
Office: 703.293.6146
Mobile: 571.237.6241
Fax: 571.317.2478
skinne@fhmtg.com

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