Pending Home Sales Find New Market Bottom
Pending home sales provide us with an advanced look at the future closed home sales report. The reason that I wanted to highlight this graph today is that it represents a very disturbing trend in Tallahassee (as well as most US housing markets. The number of homebuyers in the market is falling, as many “wanna be” homebuyers are trapped in their existing homes due to negative equity levels.
The fact is we are now back to the very bottom of the housing market established in July of 2009. Remember, this graph above shows the one-year trend of pending home sales, so all seasonality is removed (the after-summer slowdown is not what is occurring above).
To add insult to injury, I believe the number of pending home sales is actually inflated due to the high level of short sales in the market. Short sales have a higher than average fall-out ratio, thus many of the homes “under contract” today will actually fail to close. When you add this fact to the mix, it is a safe argument that we have reached a new low in the market, and home sales will continue to fall.