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Posts Tagged ‘Home Supply’

As The Pending Home Sales Index Falls, Home Buyers See Dollar Signs

Wednesday, August 4th, 2010

Pending Home Sales Dec 2008 to June 2010The Pending Home Sales Index failed to rebound from a cliff-dive in May, falling by another 3 percent more in June.  The index remains at record-low levels.

A “pending home sale” is a home under contract to sell, but not yet closed. The data is culled from local real estate associations and large brokers and accounts for 20 percent of all purchase transactions in a given month nationwide.

The Pending Home Sales Index is a future indicator for the housing market; there is a high correlation between the PHSI and the monthly Existing Home Sales report.  This is because of the relatively large sample set used for the PHSI, and because 80 percent of homes under contract close within 60 days, according to the National Association of Realtors.

June’s Pending Home Sales Index is weak by most measures, but if you’re a home buyer in Salt Lake , the headlines aren’t so bad. Fewer home sales can push negotiation leverage to the buy-side of a transaction.

Plus, there’s other positives in the market for today’s buyers:

  • Home supplies are up, which creates competition among sellers
  • Builder confidence is down, which leads to “free” upgrades and incentives
  • Mortgage rates are low, which increases cash flow and disposable income

All things equal, the current home buying conditions haven’t been this favorable in years.

The falling figures in June’s Pending Home Sales Index hint that home sales will be down through the rest of the summer and into early-Fall. However, mortgage rates may not and higher mortgage rates can do more to change a monthly payment that a small reduction in home price.

If you’re planning to buy a home later this year, consider moving up your time frame.

It’s an excellent time to be a buyer.

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Posted in Pending Home Sales | No Comments »

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May 2010 Existing Home Sales Is Better Than The Headline Data Suggests

Wednesday, June 23rd, 2010

Existing Home Sales May 2009-May 2010Existing Home Sales dropped in May for the first time in 3 months but still managed to post its second-highest since November 2009, buoyed by the expiring federal tax credit program.

An “existing home” is a home that cannot be considered new construction; a resale of an existing home.  Existing Home Sales fell 2.2 percent in May.

The press is calling the drop in sales “unexpected” and disappointing, but a deeper look at the data shows the news isn’t as bad as it first appears.

First, on a regional basis, sales were mostly solid. Only the Northeast region posted a loss. The West even managed a gain.

  • Northeast : -18.3 percent
  • Midwest : 0.0 percent
  • South : +0.5 percent
  • West : +4.9 percent

Second, the supply of homes for sale dropped to 8.3 in May and, because home prices are based on supply and demand, this is a positive for pricing.

By comparison, in 2008, the average existing home inventory was 10.4 months.

And, lastly, in May, first-time home buyers represented 46 percent of all buyers. The number was likely buoyed by the tax credit program but that doesn’t damper the fact that first-time buyers provide a support floor for the housing market.

First-time buyers in Salt Lake enable “existing owners” to move-up to bigger homes, which, in turn, trickles up to the mid-size and jumbo markets.

Analysts expected more from May’s numbers and that may explain why the reaction to the data is generally negative.  However, in many cities, home resales did just fine.

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Posted in Existing Home Sales | 1 Comment »

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Housing Starts Rise In April, Exerting Downward Pressure On Home Prices

Thursday, May 20th, 2010

Housing starts May 2008 - April 2010

Single-family Housing Starts rose by 55,000 last month, suggesting ample housing stock from which Salt Lake can choose this summer.

The report is a slightly larger read than what economists had expected.

Furthermore, for the first time since June 2009, Housing Starts appears to have broken away from its half-million unit plateau. 593,000 new homes were started in April.

Ordinarily, both Wall Street and Main Street would celebrate a strong housing sector report like this, but the Department of Commerce’s press release also held two cautionary notes.

The first point of caution is a mathematical one.  Although single-family starts increased by 10.2 percent, the survey had a Margin of Error of 10.7 percent. This means that Housing Starts may have fallen by 0.5 percent and the report is statistically worthless.

The second point of caution is tied to Building Permits, a complementary data point in the same Department of Commerce report.  In April, Building Permits fell by almost 11 percent with a tiny Margin of Error of less than 2%.  This tells us that builders are pulling back — a sign of low housing market confidence

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance. Housing Starts, therefore, should ease though June and July.

Home prices are based on housing’s supply and demand.  For the next few months, supply should elevate, helping prices remain suppressed, after which, supply should dwindle.

The best time to buy a home, therefore, may be now.  As the summer months come to close, we may find that buyers vastly outweigh sellers.

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