Summary: Pending sales refer to transactions where the seller has accepted an offer from a buyer but the deal has yet to close. The sale is not yet firm until all contingencies have been met. There is still a chance that the deal will not go through (for things such as failed home inspections and financing). That said, the majority of pending sales will go through, and the higher number of pending sales points to a busy real estate market.
Pending home sales increased in February from the month before, marking the second consecutive month of increases, according to the National Association of Realtors (NAR). All four regions across the country saw increases in pending sales contract activity. Year-over-year pending sale transaction also increased from the same time last year.
More specifically, the Pending Home Sales Index (PHSI) rose 2.4% to 111.5 in February, and increased 9.4% from February 2019.
Existing Home Purchase Contracts:
- Northeast: month-over-month increase of 2.8%, and year-over-year increase of 5.9%.
- Midwest: month-over-month increase of 4.5%, and year-over-year increase of 14.9.
- West: month-over-month increase of 4.6%, and year-over-year increase of 10.8%.
- South: month-over-month increase of 0.1%, and year-over-year increase of 7.1%.
Pending home sales across the country were 9.4% higher year over year showing continued improvement in the housing market. A low supply of available homes for sale continue to limit the number of existing home sales and pressure home prices higher. Bidding wars are still common throughout many centers in Washington and Oregon, especially in metropolitan areas.
The Pending Home Sale report is seen as a forward looking indicator as homes under contract lead to actual sales in the coming months. The index looks at the number of sellers listing their homes for sale and the number of buyers looking to purchase a home.
The Fed And The Housing Market
The Federal Reserve recently slashed interest rates by another quarter point in its last meeting after doing the same over past meetings. The Fed’s decision to slash rates yet again comes as the coronavirus pandemic continues to linger and wreak havoc on the local and global economies.
The Fed has repeatedly stated that continued monitoring of economic trends would weigh heavily on its decision if and when to modify its current stimulus program. The latest emergency slash of interest rates by 1.00% to a range of 0% to 0.25% comes as the Fed attempts to manage an economic slowdown caused by COVID-19.
Continued cuts in the Federal Reserve’s interest rate influences the short-term lending rate, which can impact the affordability of lending. In general, when the Fed cuts rates, adjustable-rate mortgage (ARM) payments will decrease.
What Do the Pending Sales Numbers Mean to You?
A healthy number of pending sales means that there is still a good deal of activity in the real estate market. That means sellers are selling and buyers are buying.
The Pending Home Sales Index simply tells buyers that there is activity in the market, and that there is likely some competition to deal with. Buyers are encouraged to team up with a seasoned real estate agent and reliable mortgage company to put their best foot forward and ensure a successful transaction.
Have Questions About Mortgages?
Do you have questions about mortgages or are ready to apply for one? We can help. Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region that includes Idaho, Colorado, and Oregon. We offer a wide variety of mortgage programs and products with flexible qualification criteria. Please contact us if you have mortgage-related questions.