Agent: There are Positive Signs in the Housing Market

Almost every day, conflicting reports are published from different sources as to what is really happening in the housing market. Even though the main reporting agencies compile statistics in different formats, they all are using the numbers from the last several months to hopefully predict improvement and stabilization.

CoreLogic (a leading supplier of analytical data) reported in its Pending Home Sale Index, that contract signing rose in May to 88.8 percent from 82.1 in April, according to information posted on the National Association of Realtors website. The data is based on signed contracts, not closings. Closings usually happen one to two months later. Hopefully, all of these proceed to closings, which will be updated in the next report.

Lawrence Yun, chief economist for the National Association of Realtors, said in an article posted on the organization's website that the improvement could be good news for home prices.

“Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” he said in the article.

“Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago, including areas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; and Seattle.” 

CoreLogic reports that even though inventory is down and sales are increasing, prices in Washington are down 6.5 percent in May compared to May 2010 if distressed properties are included. If distressed properties are not included in the statistics, residential prices fell only 2.2 percent during the same time period. 

Pending home sales have increased unevenly since last June, NAR said. Since that month last year, pending home sales have gone up in seven of the past 11 months. “Home sales still could be 15 to 20 percent higher,” Yun said in the NAR article.

“If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.” 

We will face additional problems if legislation under discussion in Washington D.C. places additional requirements on lending institutions and burdens the borrower with requiring 20 percent down.

There are two things that should be considered when contemplating selling or buying. Reports change monthly and every community is different. An improvement from one month to the next does not necessarily take into account the overall drop in the market from the beginning of the recession.

The Northwest Multiple Listing Service reports that in Area 540 (which includes much of the Eastside) new listings, total active listings and average time on market were very similar in June of 2011 and June 2010. The median home price fell from $540,000 to $509,500.

Pending sales were up nearly 43 percent in June 2011 which is considerably higher than during 2010 when the tax credits were offered. If the pending rate continues, the market could be stabilizing. Time on market is holding steady. Closed sales are down 13 percent and sale prices are down about 6 percent.

If pending sales are on the rise, how can actual sales be falling?  Distressed properties (short sales and foreclosures) still play a significant part in any market analysis. Although banks have been working on faster response times, closings have continued to be delayed six to nine months or longer. Many borrowers eventually do not qualify or decide that waiting is no longer feasible which has caused the downturn in actual closings.

With inventory down and pending sales up, real estate agents in most of the surrounding areas have seen a rise in consumer interest with multiple offers creeping into the process. The only way to get a real sense of what is happening in your particular community is to speak with a real estate agent who knows the history of your neighborhood and can find the specifics of what has sold.

Joan Probala is the managing broker for Issaquah Windermere (Windermere Real Estate/East Inc.). She has 30 years of experience in real estate, construction and sales.