National pending sales index jumps in August
According to the latest release from the National Association of Realtors, pending sales in August jumped 7.4%. From the press release October 8th:
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.
What N.A.R. is measuring with this data is the number of homes that were put under agreement (eg. buyers and sellers came to terms on a price and agreed to the transaction). From that point it typically takes 6 weeks or so on average for a pending sale to close. The pending sales from August should show up in the September and October housing data as closed sales. Not all pending sales close of course, and it will be interesting to see if the recent credit crisis and financial instability will cause a higher than average number of these pendings to fall out.
This data is from August, which coincides with the Fannie and Freddie Mac takeover by the government, which eased some of the tightness in the lending market at that time, allowing buyers to get into the market. It was also before the current financial and credit crisis occurred in September, so it will be interesting to see the effect the crisis will have on September's numbers.
Yun [NAR chief economist Lawrence Yun] notes the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”What this data is showing though is more positive news for the housing market, building on some of the other recent data that seem to indicate a housing bottom in the near future. However, it remains to be seen how much of an impact the financial meltdown will have on the market. There are a lot of scared people and businesses right now that really don't have enough information to make good decisions with all the turmoil and volatility in the market. Surprisingly, I have still been seeing a decent amount of activity recently in the Boston market, but we'll have to wait a few more weeks for decent data to emerge to see the magnitude of the impact.
