We’d be remiss in not pointing out that the local realtor orgs have disgorged the July numbers.
Jim Buchta at the Strib hits the high points:
- Home sales up 6.2% from a year ago.
- Pending home sales notched the first monthly increase in 30 months, still down 7.6% year-over-year
An increase in sales and pending sales is touted as perhapsmaybe an early sign of a turnaround or "bottom." It might well be, but before we start toasting, remember a few points:
1. Sales are up, but at what price? Yes, more sales will help clear out the excess inventory, which is part of the problem, but lots and lots of sales at ever lower prices will not a turnaround make.
2. Month-to-month data on pending home sales can be noisy/volatile: A single month-to-month increase in the last 29 months is not necessarily a sign of a nascent turnaround. Simply that July was better than June. If we string a few of these months together, that may mean something, BUT
3. Pending sales are not closed sales: They are signed contracts pending closing. Nothing more, nothing less. In our experience, and from what we have heard from nearly everyone in the industry, (and with "lender-mediated" – foreclosures, short sales, etc. – sales accounting for something like 20-30% of activity,) the pull-through rate on pending sales is as poor as any time in recent memory.
In other words, many pending sales, and more than what most would consider "normal" simply never make it past the contract stage, and don’t close. (lots of reasons for this, but that is another post.)
"Cancellation rates on pending sales are tough to quantify right now. Normally, we see closed sales follow a similar trajectory as pending sales a month or two later. We have not seen this same level of correlation recently."
Jeff also promises a sexy graphic illustrating the divergence of pending vs. closed sales, which we will run right here if he can mash the data for us and make pretty.