I’m not sure if you saw the most recent pending home sales report but the numbers were clearly down from last year, meaning less homes are selling today as compared to last year at this time.

The question I have is does that mean we are entering a pullback in home prices, and could the chaotic presidential election put us into a housing downturn?

Let’s look at the numbers: It is clear that pending home sales are below last year. That’s not good; caution should be exercised, right?! But why did pending home sales drop?

pending-home-sales-2016

By region we can tell that pending home sales are down in every region (as compared to last year at this time) except for the Northeast, which soared. This is puzzling. Let’s look deeper into what could be going on.
pending-home-sales-graph

Isn’t this interesting – home prices are up nationally (as compared to last year), but the laggard is clearly the Northeast. Why would sales be up in the Northeast, but prices barely budged, while the exact opposite occurred in the West, South and Midwest regions? Trump/Clinton trickery no doubt! Or is it?

existing-home-prices

I wonder if it could have to do with supply and demand? Supply is definitely down. The supply of existing homes is down over 10% as compared to this time last year.

housing-supply-2

In fact, across the board, regardless of price, the supply of homes for sale is down compared to last year at this time.

number-of-homes-for-sale

And look at this! New homes being built are still 40% below the historical average going back 35 years… The chart below also gives us another clue. Look how the number of new home starts skyrocketed in 2002 – 2006. Do you remember what happened in 2007/2008? The mortgage and real estate meltdown was caused by TOO MANY homes and poor underwriting standards. Do you see those traits today?

new-single-family-starts

If you are still with me, I’m going to bring it home. The Northeast was the slowest region to move through foreclosures due to their judicial foreclosure process, which took forever. So they are just now pulling out, they have plenty of homes to sell (inventory) and so sales are rising but prices are stable (because they have plenty of inventory/supply).

Compare that to the other three regions, with VERY low supply, which is slowing the number of pending home sales, and pushing prices higher because there is massive competition between buyers to purchase the best homes being listed. And with new construction way behind the historical levels, this shortage of inventory will likely continue for a few more years, at least.

So don’t listen to the talking heads looking to sell you their media driven spin on the real estate economy. You now know more than 99% of those bozos! Wait, am I talking about the news anchors or the presidential candidates? I forgot! ☺

If you have questions on how this might affect you, your family, or colleagues, please call Josh Mettle at (855) 260-9932 or Contact Us here.

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