Rise in Pending Home Sales at odds with local closings
January 9, 2008
This is the title of an article on Pending Sales being reported in the Tucson MLS Statistics Reports over the past few months.
Once again we being treated to a look at the Tucson Real Estate market statistics that does not take fully into consideration the changes that have taken place in this market in the past 6 to 8 months.
The main premise is “If the Pending Sales are up then why aren’t the closed sales numbers reflecting this increase in pending sales?”
There is a lot of talk in the article but not much in the way of good analysis. Here is just a quick list of reasons the Pending Sales are up but the closed transactions aren’t following in 30 to 45 days like they have over the past few years.
- There has been a lot of New Construction sold in Tucson in the past few months with builders offering some huge incentives. Many of the “Pending Contracts” are for homes that aren’t built yet. Some of these homes will be 1 to 2 years before completion because the builders offered an extended time to build for buyers wanting a longer build and close time.
- For the past few years you couldn’t find a seller that was willing to take an offer contingent on the sale of the buyers property. Therefore, most of the pending contracts were being closed in 30 to 45 days.
- The process of closing on an home even with a buyer having good credit has been streched out because of issues in the Mortgage and Insurance industries. We are finding there is more paperwork required to close and in many cases if there is any mold found on the property it has to be remunerated and tested “before closing” not after has been the practice in the past.
- The Pending Sales are entered “in a timely manner” or there is a fine. However as we have recently demonstrated the Closed Sales might not be entered for several months following the release of the report thus skewing the appearance of the relationship between pending sales and closed transactions.
Last week I wrote about the 7% of closed transaction in the Tucson MLS that are not being reported or accounted for in any of the reports. Closed Sales for November 2007 are reported at 759. When I wrote the post on the unreported closed transactions on Jan. 1 there were 796 closed transactions. I just stopped writing this post and did the data pull again for November 2007 closed transactions and there were 800. This is a difference of 41 more close transactions for November 2007 than were reported.
It isn’t hard to see how Pending Sales are not being reflected in Closed Transactions in the following months report. The Pending Homes Sales are not at odds with the Closed Sales, but they are lagging. A better title would be “Rising Pending Homes Sales are not reflected in timely closes as they have been in the past.”
