Another Positive Housing Signal : The Number Of Homes Under Contract Increase

The number of homes under contract to sell is rising, another signal that the housing market may be regaining its footing.

As reported by the National Association of Realtors, Realtor.com the Pending Home Sales Index gained 2 percent in February. The report measures MLS-listed homes in "pending" status -- sold but not yet closed.

Pending Home Sales is not a perfect statistic, though, by any means.

For one, the Pending Home Sales Index doesn't account for non-MLS listed homes including For Sale By Owner properties and mass foreclosure auctions. In certain markets nationwide, these two categories represent a large percentage of the overall transaction volume. In our market of Renton and Kent homes there are few FSBOs and not a huge amount of foreclosures, at least yet.

Secondly, Pending Home Sales samples just 20 percent of all MLS-based transactions -- hardly a complete listing.

But most importantly, a "pending" home sale is not the same as a closed home sale. A lot of things can go wrong between the time a home goes under contract and the supposed closing date. For example, the Renton home inspection could fail, the contract could fall apart, and/or the buyer's financing could be denied in underwriting. Or as in the last post I wrote, a buyer can goof up the program. All reasons why you need a Renton Realtor to cover the more than 100 parts of the process of getting a home bought or sold.

All things equal, though, Pending Home Sales is a fair forward-looking indicator for the housing market as a measurement of buy-side demand for homes.

When Pending Home Sales rise, it's tells us that buyers and sellers are matching up, clearing out market inventory. And actual home sales often follow "pending" ones -- 80 percent of Pending Home Sales will close within 60 days. Things are looking up.

The Gary McNinch Team, Keller Williams Realty Southeast Sound, Renton WA Realtor have been helping our great clients buy and sell homes before the market jumped up crazily. And better yet we have been ahead of the market as it has went down slowly. We study the housing market to stay ahead of the game. Give us a call, send an email or twitter us with a tweet tweet tweet.