Pending home sales, in the past, were an accurate indicator used in forecasting real estate sales in the U.S. We had a fairly standardized system of home sales, and while transaction closings could range between a couple of weeks and a couple of months, if a home was "Pending Sale", it was highly likely that it would close.
We've been predicting future home sales for years with great accuracy by planning for the vast majority of these pending sales to close in the next month--not anymore.
With the new crops of distressed properties, short sales, and ever-changing lending guidelines, there's no such thing as a sure sale these days. The percentage of pending sales that actually become closed sales has shrunk dramatically in recent years. Short sales, which can many times last up to 6 months, create a large lag between pending date and closing date. Even worse, my lastest research has shown that less than 20% of buyers who enter into a contract to buy a short sale are actually successful. This means that 80%+ of "pending sales" which are short sales will end up failing. Pending is actually nothing of the sort, in these cases.
Even the increasing percentages of short sale failed transactions can't be predicted with a leading indicator, factoring in their likelihood of failure. There are certain months when, based on a government decree or a financial quarter-end, banks will close a larger percentage of short sales. In other months, they'll ignore their distressed sales altogether as a change in legal requirements or problems with their process are revealed.
The unfortunate answer for the real estate profession is this:
"Pending"is no longer "pending a closing".
"Pending"is no longer "pending a closing".
Pending now means, "pending a decision on whether or not to close". For now, we should really return to forecasting home sales with the old, less-exciting method. Last month's closed sales are the only statistic that has the accuracy and validity necessary to base our estimates upon. The national banks need to create a simplified, streamlined, and standardized system for closing distressed sales that all agents, sellers, and buyers can follow. At that point, we'll know how long a short sale will take, and how likely it is to actually close.
Until then, many pending home sales just simply aren't pending at all.
Read the full Seattle Waterfront Homes blog.
Sam DeBord is a Realtor®, Managing Broker, and Green-Certified Pro with Washington State Realty, LLC.
Source: Individually compiled NWMLS data. The NWMLS did not compile or publish this information.
Sam DeBord
Realtor® | Managing Broker
SeattleHome.com | Washington State Realty, LLC
206-658-3225 cell | 800-883-0712 fax
Member NWMLS, N.A.R., WA Realtors, Seattle-King County Realtors
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