Pending sales and the spring market

LOL. From the article:

Interestingly, the Northeast appears to be heading for a big bounce in home sales. The Pending Home Sales Index in the Northeast (made up of New England, New York, New Jersey and Pennsylvania) rose 32.6% from March and 0.8% from April 2008.

.08% in "seasonally adjusted" numbers. Yes, that's "brisk activity." What else does Bagdad Bob have to say? And how can I get a job retyping press releases?

With increased volume comes price discovery. Brace yourself for more rapid price declines as volume continues to pick up... Some additional points to consider:

1) Watch the denominator. Sales volume is still very low. And the lower the volume, the higher any increase in units becomes as a percentage. For example, if sales are running 1 unit per month then selling 1 additional unit per month is a 100% increase. But if sales are 100 units per month, that same 1 unit increase is only 1%.

2) Conspicuously absent from the NAR's press release is how many of these transactions were foreclosures or distressed sales. Something tells me that ending the foreclosure moratorium may have had something to do with the surge in volume.

3) Financing is tight, and lenders continue to kill deals. It will be interesting to see how many of these contracts actually close.

4) Finally, don't assume increases in sales volume will somehow result in price stabilization. National trends suggest that the markets which have seen the greatest upticks in sales volume (CA, FL, AZ, NV) are also the markets that have seen the largest price drops. Prices drive volume, not the other way around.

I'd like to see what the dislocation in the bond market, with mortgage rates going from 4.8% to 5.3% in a matter of days, is having on the final sales numbers.

Financing is tight, and lenders continue to kill deals. It will be interesting to see how many of these contracts actually close.

I obviously can't give you a URL on this blog, but I've seen online that in places like Seattle a third of the deals are eventually falling through. Clearly this has a lot of variation geographically, but takes some digging to figure out.

Lance, I have to say that I find your posts extremely informative and refreshing. I appreciate that you offer facts to support your arguments and are polite and respectful to others. Too many on this board offer nothing but sarcasm - what a waste of time. Please keep up your posts!

#2, and #3 excellent observations. Higher rates and higher crude prices $70 this a.m. will certainly put a damper activity going forward. I would also love to see how many pending sales fall by the wayside due to tighter underwriting criteria,
job losses, reduced confidence, softening rental market, etc. As Lance correctly points out much of this activity is likely centered in REO/distress type sales. As a former banker with many friends still in the industry, I've been informed on numerous occassions, that they are sitting on a ton of "zombie loans", where mortgages are not performing, yet they have not foreclosed. They have also mentioned the overwhelming amount of reo that has been held off the market, in an attempt to keep prices from heading even lower. This will get much, much, worse...

One more thing... I have been informed the MLS recently changed the way they report short sale transactions. Basically, short sales are now considered “pending” as soon as the buyer and seller reach agreement, even if the bank has not yet approved the sale.

Short Sales: Status Change Required after Mutual Acceptance
Rule 120 (b) requires the listing office to timely report the mutual acceptance of a purchase and sale agreement for a short sale as Pending (e.g. Pending, Pending Inspection, Pending Back-Up). A Short Sale property shall not remain in the Active status if the buyer and seller have reached mutual acceptance and are waiting for the lender’s consent to the transaction. The only Short Sale properties that should remain in the Active status are those properties where the buyer and seller have not reached mutual acceptance.

No doubt, this is inflating the numbers.

I sold one of my houses last week from an offer 30 days earlier. The buyer got easy approval through a Mass Mortgage plan for people with limited income so I can't say I echo the same "nobody will buy, prices will fall" sentiment.

whoa boy!

more meaningless month over month spring market data. because we all know that historically sales don't trend upward from April to May in the Northeast. D'oh!

"...though sales are still off roughly 8 percent from last year."

year over year data. more meaningful. it's like talking to a wall.

To All The Nay Sayers Who Post on This Blog (who said that sales are dead, the market is crumbling, the sky is falling, that you’ll be able to buy a house next year in Boston for $10,000 – you know who you are):

Ha - Ha - Ha!

Sold my Boston condo last week, for the SAME price I paid in 2007 - and I negotiated a lower commission with the broker.

If your property is priced right, shows well, in a desirable location – it will sell.

Sellers: don’t listen to the posters in here – the bottom feeding “buyers” who are looking for a “steal.” They’re going to wake up in 2011, look around, and say to themselves “Looks like I missed out again…”

So long, SUCKAS!
PROU

All assessments in Mass are done the same way which is based on data that is from 2 years previous. This means that if a house is appraised in 2009 for 350k that number is based on data from 2007. It's all well and good in a market that is going up , no doubt it will sell fast however you have RE agents doing this now and these houses are not moving. I can' t tell you how many houses I've looked at that have been on the market 1-2 years with an asking price that is within 10k of a 2009 appraisal. The market has come down drastically in two years so if the market analysis values were 350k in 2009 (2007) values that means the house is really worth somewhere in the vicinity of 250k. When the pricing is adjusted to reflect the downward trend for two years the house sells quickly. The prices are way off!! I used to sell RE. It seems most realtors are not even aware of this. You can check with the state this is how the assessments are done. In the end the RE agent is doing his client a great dis-service because he/she is causing you to lose money over time if your house is not priced to sell in 90 days or less. That's the rule of thumb. If you are selling look to see how close you are to the assessment value. If your house has been sitting I bet it's very close to that value.