One month after posting a multi-year high, the Pending Home Sales Index retreated to 99.3 in June — a strong reading in its own right.
At the same time, millions of homeowners find themselves underwater, unable to refinance and take advantage of these historic low rates.
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For those on the hunt, a “pending home sale” is a home that is under contract to sell, but not yet sold. June’s value of 99.3 marks the 14th consecutive month during which the index showed year-to-year gains.
Last year in June, the index read 90.7.
For home buyers in Sacramento and nationwide, the 14-month winning streak is one worth noting — specifically because the Pending Home Sales Index is different from the other housing market data that tends to make headlines.
Unlike the FHFA’s Home Price Index, for example; or the monthly New Home Sales data which both report on how housing performed in the past, the National Association of REALTORS®’ Pending Home Sales Index looks at how housing will perform in the future.
With high correlation, the Pending Home Sales Index predicts how Existing Home Sales will perform two months hence. This is because 80% of homes under contract convert to “closed sales” within 60 days of going into contract, and many of the rest convert within Months 3 and 4.
For today’s home buyers, the Pending Home Sales Index implies that the current market is somewhat “soft” as compared to May, a scenario which lends itself to buyer-friendly negotiations. Plus, with mortgage rates at all-time lows, home affordability has never been higher.
To be fair though, every part of the country is different and the Pending Home Sales Index is a macro look at housing. As anyone “in the know” understands, Sacramento is not a buyer friendly place right now!
It’s an opportune time to buy a home in Sacramento, if you can add the right home, the right lender, and the right realtor to the mix.