First Time Home Buyers
Following up last week’s reports that both New and Existing Home Sales had dropped after the expiration of the first time home buyer tax credit, Pending Home Sales jumped 5% in July.
This data is from the July Pending Home Sales Index, published by the National Association of Realtors®.
A “pending home sale” is a home under contract, but not yet closed. Historically, 80% of such homes close within 60 days which makes the report an excellent, forward-looking indicator for the real estate market.
We see this connection in May Pending Home Sales report (dismal) and the July New and Existing Home Sales reports. How close? The Pending Home Sales report dropped 30% in May. Existing Home Sales dropped 29% in July.
That’s a strong correlation.
In fairness, the numbers are still low. The Pending Home Sales Index is still the second-lowest on record and is not a good number. Again, this market is not about whether things are absolutely great, it is a matter of whether things are strong relative to the worst-case scenario.
For at least the next month or two, the single-driving factor to mortgage rates is whether things are absolutely worst-case or anything better. If the economy, housing, and everything else falls apart, mortgage rates are priced for that and will remain steady. An iota of recovery could mean many iotas of rate increases.
Given this month’s results on the Pending Home Sales report, September’s Existing Home Sales report should show a similar tick up.
If you enjoyed this article, please consider sharing it!
