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Business Real Estate Understanding the Pending Home Sales Index
| Understanding the Pending Home Sales Index |
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| Written by Rob Kosberg |
| Wednesday, 17 September 2008 07:51 |
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The National Association of Realtors measures the number of pending homes nationwide on a monthly basis. They do this by tracking when there is a status change from an active listing to a pending sale via the Multiple Listing Service. This is called the Pending Home Sales Index. The real estate industry views the index as a sign of future home sales. They do this with the assumption that 80% of all homes pending will close within 2 months and the remainder will close with 4 months. The index is intended to predict home sales but it may not be it's best use for several reasons. 1. It doesn't track FSBO sales 2. It samples only 20% of all the MLS transactions 3. it doesn't take into consideration new construction. Since many transactions do not close these days due to the mortgage crisis the PHSI may be skewed. it is, however, a great way to assess buyer demand for real estate on a month to month basis. When the Pending Home Sales Index is rising, we can infer that more buyers are in the market for homes and this is a signal of market strength. After all, pending sales can't happen unless there are buyers out there. And with more buyers competing for homes, home prices tend to rise. The Pending Home Sales Index experienced a large increase in June 2008 for the 2nd time in 3 months. This occured even as most economists were calling for a decline. This indicates an overall gain in the market for demand. Again, this does not show us exactly how many of these transactions have closed. We only know from this data that the market demand is increasing since more buyers are putting houses under contract. And typically when buyer demand is increasing then we can assume the real estate market will not be far bhind. About the Author: If you are in the market to Buy a Home then visit Rob Kosbergs' Detailed FREE Guide on Buying your Dream Home with a No Money Down Mortgage or for up to date Mortgage info visit my Mortgage Blog Kindly provided by MoneyHunter.org You are welcome to use this article on your own website, if you include the link just before this text. |
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