APRIL PENDING HOME SALES DOWN 5.5%. WHY THIS IS A POSITIVE.

The business shows are all regaling us with this “negative news” about the latest national April pending home sale figure: Down 5.5%.

You know the script: steam coming out of the housing market; economy must be slowing…ya-da-ya-da-ya-da. This is a great case of headline data being misinterpreted in knee-jerk fashion.

Northern Virginians take note: Yes, existing pending home sales are down. But do not let the simple “analysis” and media hype tell you this is bad for pricing. Quite the contrary.

There are chronic shortages of available homes for sale. I am puzzled by this, since prices are rising and there are multiple buyers immediately available for any listing. One would think higher prices would shake free more inventory, and I do believe that will happen, sooner rather than later. But as of now, it has not happened.

So who gets hurt by this reduction in activity? Real estate agents see fewer total sales to go around…do you honestly care? Developers may see a reduction in new contracts…do you care? But does this reduction in activity REALLY mean the market in general is worse? NO!!! Should you care? Of course!

Here is the bottom line: Reduction in activity is the result of sellers not putting homes on the market for sale, not caused by any balking by buyers. Buyers are clamoring for inventory in any reasonable neighborhood. Interest rates hit ANOTHER low today (30 year mortgage loans headed to 3.5%). Buyer affordability indices are now at extremely positve levels. 

Outlook for the immediate future: Continued upward price pressure due to ack of supply and exceptional buyer affordability. As prices rise, appraisals “catch up” to true market values, making sales even more brisk. More inventory begins to hit the market as those who were “under water” on home loans suddenly rise above break-even, and as others waiting for higher prices get those higher prices. When activity is strong again, the media and others will be heralding the “market turnaround”. At that point…get worried about pricing.

But for now, enjoy the upward price pressure if you are a seller; take advantage of the low rates and keep a keen eye for new listings, if you are a buyer.

Please call, or write,  to discuss this in any detail you would like. I love the discussion on this topic.

Ray Wedell

RE/MAX Gateway

703-855-7299

www.RayMaxInternational.com

RayMaxTeam@gmail.com

 

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About RayWedellRealEstate

Real estate professional with Samson Properties. Chartered Financial Analyst, CFA
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