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Pending Homes Sales Index is down

Today I got several report from reliable sources (NAR, FAR and that the pending home sales index was significantly down from October 2009 to November 2009.

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Pending home sales are Down

As most of us know the pending home sales index is an excellent indicator often used to forecast future real estate activity in a market or even nationally.  The idea is that the higher this index the lower the inventory will be in the next 30 to 60 days and we all know that the lower the inventory the more likely prices are to increase.  Well the same can be said for the reverse; that is to say the lower this index the less homes can be expected to close and if sellers continue to place properties on the market then inventory should increase and prices drop.  With that said the November 2009 pending home sale index dropped by 16% from October 2009; however, this may be very misleading.  The reality is that there was one big factor that was more than likely artificially increasing the index in November 2009.  That factor was the tax credit expiration.

I believe that buyers were rushing to the market in order to make their purchase in time and benefit from the economic relief program consisting of the tax credit.  However, the extension of the tax credit may have simply alleviated the pressure of  the rush and therefore deflated the pending home sales index.

When we look at additional data we find that the pending home sales index actaully went up significantly form November 2008 to November 2009, this is more like comparing apples to apples.  In this case the index rose 15%, according to data gathered and received from realty This is a clear indication that the marker was certainly headed in a better direction in 2009 over 2008 and I believe that 2010 will be better than 2009.

In addition, prices have been creeping up in most major metropolitan areas.

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