Pending Home Sales are on the Decline
Although the housing market has been showing major signs of improvement since 2008, we can’t ignore the most recent changes, which are a little unsettling. Both August and September had a decline in pending home sales, which indicates that the real estate market as a whole may once again be declining.
Usually, about 4-6 weeks’ time passes from the signing of a contract to the close of the transaction. During this time the sale is considered “pending”, and the Pending Home Sales Index (PHSI) is a great indicator of the general health of the real estate market (as well as the economy) because it can help predict how sales are going to look in the next month or so.
The decrease in pending home sales was sudden and unexpected after the housing market had been on an upswing all year. Experts believe that thesemixed signals from the housing market are in fact normal for such a massive recovery, and we can expect the market to continue to rebuild itself in the coming months. Most likely the issue is the low number of properties on the market – prices are driven up by the low inventory, which discourages buyers from making a purchase. We can expect to see better pricing and increased sales once home builders increase construction and more sellers place their homes on the market.
For our local housing market, this would be a massive improvement for the housing shortage in Los Angeles, especially for renters. The good news is that the Single Family Rental market is projected to grow immensely in the next few years – along with its associated construction.
Between the decline in pending home sales, the lack of properties on the market, and the seasonal slow down (winter is generally the slowest time of year for real estate), we can expect the real estate market as a whole to be taking a step back in the next couple of months. However, we are still seeing signs of improvement, so this is no time to panic – we’re still in recovery mode!