According to Forbes today:
WASHINGTON (Thomson Financial) - Pending home sales showed unexpected stability in September despite widespread reports that buyers were finding mortgages harder to get or postponing purchases because of potential further price declines.
The National Association of Realtors said its Pending Home Sales Index (PHSI) rose 0.2 pct to 85.7 in September from the revised 85.5 reading for August. Economists were expecting a decline in the neighbourhood of 2.5 pct.
The report was ‘better than a sharp stick in the eye,’ said real estate analyst Mike Larson at Weiss Research. ‘It seems the Federal Reserve’s surprise interest rate cut may have helped bring a few buyers out of the woodwork.’
First of all, this "improvement" is versus last month’s downwardly revised figure, and likely as not, this month’s number will be revised as well. What is a bigger issue however, is that in a down market, pendings are not necessarily a good indicator of future sales.
During the boom years, when sellers could sell an existing home and financing was easy to come by, a high percentage of pendings went on to close within 30 days. In the current market however, some pendings never become sales, or may stay pending for months as sellers try to sell homes or secure financing.
It is difficult to do an "apples to apples" comparison with national numbers, as rather than using the number of pendings, the NAR uses an index, which compares the current level of activity with the average level of contract activity in 2001. The Tucson Association of Realtors however, does give the actual number of pendings in their monthly report, so it is possible to compare pendings versus listings. Note this interesting phenomenon- while year-over-year, pendings are up, sales are down:
