Pending Home Sales Predictions

This week our listings saw an average of two showings each.   Earlier in the week our Monthly E-Newsletter was sent out.   Included were the Mecklenburg County real estate market indicators.   Here’s a summary that compares September 2007 to September 2006:

Home sales are down 17%

Average sales price is up 6.8%

Average time on market is unchanged

Pending home sales are down 31%

Housing supply is up 23%

Mortgage rates have remained the same.

Clearly the numbers show that we are experiencing a slowing market.   Surely, this isn’t news to anyone.   The big question everyone wants to know is:   How much longer will the slowdown last?

As I study the market week after week, I continue to hold the opinion that the bottom for our Charlotte market isn’t far away.   All the fundamentals of a strong real estate market still exist in our area.   Mortgage rates are still very low, unemployment is low, and we still have lots of people moving to the area due to the creation of new jobs.   My prediction is that the market will remain slow through the end of the year due to a seasonal slowdown, as many buyers don’t make home  purchasing a priority during the holiday season.   However, it is my belief that 2008 will be a great year for Charlotte real estate beginning right after the New Year.

One of the best predictors of the future real estate market is the ‘Pending Home Sales’ statistic.   This value represents the number of listings that are currently under contract.   Typically, pending listings will be sold (or closed) within 30-60 days.   When pending sales drop, you can be quite sure that the market data will show a slowdown the following few months.   Conversely, when pending home sales increase, we can tell that the market is turning around.

In 2007, the pending home sales indicator in Mecklenburg County peaked in April.   As expected, the number of home sales peaked the following month in May.   Sales have continued to drop each month since May.   Part of this is due to the seasonal nature of real estate in Charlotte, where springtime and early summer tend to be the busiest.    In 2006 home sales peaked in May as well, but then experienced another peak in August.   This year we did not see that second peak.

The pending home sales indicator has dropped each month since its peak in April this year.   It has reached its lowest point in the two years I’ve been tracking in September.   Eventually, we will see this indicator level off or start to rise again.   I will be watching closely and will be the first to report its occurrence.   When the pending home sales indicator begins heading the other direction, we know  that the storm is coming to and end  here in Charlotte and we’ll be headed back on the path of a balanced, healthy market.   I am just as anxious as you are.  

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