Just one month after touching a 3-year high, the National Association of Realtors® Pending Home Sales index plunged in November. A "pending" home sale is a home that is under contract to sell, but has yet to close.
The 16 percent drop marks the first retreat in Pending Home Sales since January of last year.
The weak Pending Home Sales data is an indication that Existing Home Sales data will be soft this month. This is because, historically, 80 percent of Pending Home Sales convert to "closed sales" within 60 days, and most of the rest close within 120.
Even with Pending Home Sales down, the Philadelphia housing market should not lose much of its momentum. For today's home buyers, this "lack of slack" can represent both a concern and a terrific opportunity. Though the weather keeps some buyers inside, the tax credit provides a real incentive to get out and participate in the market. Acting now allows you to get a financial benefit and to deal with sellers who have possibly held their homes into the winter.
Home prices are a function of supply and demand; of buyers and sellers. When buyers outnumber sellers, competition leads to bidding wars, ultimately, and higher home prices overall. The imbalance can also create a sense of urgency that results in over-paying for a home.
When buyers are sparse, on the other hand, the psychology of real estate shifts.
Home sellers are keenly aware of foot traffic and requests for second and third showings. Without buyers, their homes can't sell. They also note a lack of general feedback from the market.
It's at this point that seller fear can creep in and it becomes a buyer's best time to buy.
Based on November's Pending Home Sales data, it's clear that home sellers are in abundance right now. Home buyers have leverage.
It may not last.
With mortgage rates easing lower this week, the federal home buyer tax credit still in effect, and the Holiday Season officially over, buyers are getting back to business in Mount Holly and everywhere.
Plus, with the tax credit deadline of April 30, 2010 fast approaching, buyer activity should increase over the next 4-6 weeks.
The market looks ripe for a buy but don't rush it. Take your time and bid right. But when you're ready, be ready -- once the market momentum shifts back to sellers, you might lose all that leverage you built up through the winter.