As prices tick down, the National Associations of Realtors Pending Home Sales Index jumped 10.4 percent from September to October, up 9.2 percent year over year.
Keep in mind, however, that NAR’s Index reflects contracts not closings and the percentage of Realtors reporting a failed contract* nearly doubled last month, from 18 percent in September to 33 percent in October and versus 8 percent in October 2010.
In the West, the Pending Home Sales Index ticked down 0.3 percent from September to October, up 8.1 percent year-over-year.
UPDATE: The language from the National Association of Realtors last month:
Contract failures reported by NAR members jumped to 33 percent in October from 18 percent in September, and were only 8 percent a year ago, so we should be seeing stronger sales.
More accurately stated, however, the number reflects the percentage of Realtors that report having experienced a contract failure, not the percentage of contracts that have actually failed.
∙ Pending Home Sales Jump in October [realtor.org]
∙ S&P/Case-Shiller San Francisco: Prices Fell In September [SocketSite]
“failed to close,” or “taking longer to close” ? The story right now is that lending is in a bottleneck due to all the refinancing going on.
[Editor’s Note: Failed. “Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses.”]
a casual data point from redfin is that more than half of the houses listed on the MLS right now are pending/in contract. (well, when I checked a week ago or so).
I think lots of folks put buying plans on hold during the artificial crisis-of-confidence during the debt debates. Now that the political-circus induced fear of the US defaulting has gone away folks are back to realizing that the economy is slowly growing and are no longer afraid of a double-dip. Thus, jumping back onto those home-buying plans they put on hold during late summer.
My guess is that the statistics will start changing quickly over the next few months. We’ll see…
“a casual data point from redfin is that more than half of the houses listed on the MLS right now are pending/in contract.”
Note that as contract failures increase, assuming that the homes are re-listed and go back into contract eventually, the ratio of time a home spends in contract would increase. This would tend to push up the observed fraction of listed homes in contract.
The YoY change from 8% failures to 33% is fairly large.
Editor, do you have a source for 33% of all contracts falling apart. Even I find that hard to believe.
If that were true, that would basically be a cataclysmic event. You lock out 33% of your buyers in any market and prices will plummet. But I find it nearly impossible to believe.
“a casual data point from redfin is that more than half of the houses listed on the MLS right now are pending/in contract.”
Imagine that? People taking their homes off the market or not listing in mid November, leading to a higher proportion of homes in contract than listed for sale? That’s heresy!
Editor, do you have a source for 33% of all contracts falling apart.
From the National Association of Realtors last month:
More accurately stated, however, the number reflects the percentage of Realtors that report having experienced a contract failure, not the percentage of contracts that have failed. Our apologies for adding to the confusion and since clarified above.
Short sales bloat the percentage in contract. We’ve seen properties linger in contract for 10 months while the selling bank dithers.
“More accurately stated, however, the number reflects the percentage of Realtors that report having experienced a contract failure, not the percentage of contracts that have failed. Our apologies for adding to the confusion and since clarified above.”
Unclear to me that the above is correct.
If this report is based on a random sampling of answers to the question: “Did you have any problems in your last sales contract?”
It would seem that the reported number would indeed be a measure of the percentage of failed contacts. Given that this a NAR survey based on self reports, who knows how well it was done though.
Re: lingering the below shows 20% delayed a month or more before settling.
See p8 http://www.realtor.org/research/research/reps
[Editor’s Note: Note NAR’s language in August: “Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price – were unchanged in July, reported by 16 percent of NAR members.”]
“Short sales bloat the percentage in contract. We’ve seen properties linger in contract for 10 months while the selling bank dithers.”
Yes, I’ve seen a lot of short sales in and out of contract lately. Short sales seem to be the majority of houses in contract or listed in some areas. I’ve seen some drop out of escrow, sometimes more than once, and some are definitely on their 2nd, 3rd, or even 4th escrow. The 1 in 3 realtors having a house drop out of escrow certainly didn’t surprise me.
“[Editor’s Note: Note NAR’s language in August: “Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price – were unchanged in July, reported by 16 percent of NAR members.”]”
Both NAR press releases cite the Realtor confidence index survey I linked above as the source for the contract failure number.
33% of relators indicating that they had seen a contract failure over some time period would indeed not be representative of the percent of overall contract failures. But on p8 of the pdf from the above link, the survey question is clearly:
“Did you have any problems in your last sales contract?”
Adding up failures due to appraisal, financing and other on p8 in the report gives 33% so I’m assuming thats how they got the headline number.
It seems to me that 33% of randomly chosen relators reporting that their last sales contract failed would be a measure of overall contract failure rate.
The fact that it doubled in one month is still pretty surprising. That means maybe 20% are falling apart. That’s still huge and a huge increase.
“The fact that it doubled in one month is still pretty surprising. ”
Note also towards the end of the report the graph of failures due to reasons other then financing. The increase there would not seem to be consistent with the increase in failures being purely due to financing issues. And seems more indicative of people jumping out of the market rather then in. The whole thing needs to be taken with a grain of NAR though.