A flurry of mixed housing news hit the airways last week. We’ll look at the highlights, add some context and insight and come up with our own conclusions.
First, pending sales continued their monthly decline in October, falling for a fifth consecutive month, according to the latest data set from the National Association of Realtors. Pending sales are important to watch because they track homes that are under contract and are predictive of where the market is heading in coming months when those transactions close.
Some are concerned because the decline has happened so quickly. In June, pending home sales were up 11% from year-ago levels. And by October, pending sales were down 1.6% from year-ago levels.
For one, we’ve entered the season that’s typically a bit slower for the housing market each year. And coming off one of the hottest summers the market has seen since the downturn may be causing the decline to seem more dramatic.
Also, the reality of limited inventory continues to plague some markets. Rising interest rates and climbing home prices are also pricing some buyers out, which is likely slowing a few markets down.
Should we be worried?
We don’t expect the slowdown to greatly impact the continued momentum we expect to see in 2014. Part of our reasoning here has to do with a bit of great news that came out on the housing market this week: declining foreclosures.
Foreclosure pre-sale inventory at the national level has fallen to its lowest point since 2008, according to new data from Lender Processing Services. The inventory represents 2.54% of all mortgages homes in LPS’ October data, a 3.23% drop from the previous month and a nearly 30% drop from the previous year.
Pre-sale foreclosure inventory means the number of loans that are in some stage of foreclosure. This aspect of the housing market has been a key part of the big story for several years now. It appears that this nightmare is quickly becoming part of the past.
What does it all mean?
Again, we’re at that time of year when things do start to slow down and prognosticators start sending out messages about where we’re headed next year. Our philosophy is that it’s best to look at as much data as you can before drawing conclusions – and it’s best to always keep your local market in context.
We think we’re headed for another strong year for housing next year. And while it may start a little slower than last, all the requisite parts are in place for markets to improve or even thrive, depending on where you are located.
By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.