Pending Home Sales Jump Again, Closed Sales Holding Steady

In September, Thurston County’s pending home sales climbed 14.5% over year ago results. There were 380 pending sales in September 2009 versus 332 in September 2008. A pending sale is a contract that is accepted but has not yet closed.

September’s performance brings the string of positive gains in pending sales to five months. For the year, pending sales are up 5.7% over 2008.

There are several factors leading to the increase: (1) interest rates, (2) the first-time home buyer tax credit, and (3) lower home prices.

As we reported last week, interest rates are approaching their record lows set earlier this year. Those rates are driving down the cost of ownership and buyers are recognizing the opportunity.

The first-time home buyer tax credit is also spurring activity amongst that set of buyers. The looming expiration of the credit (must close by November 30, 2009) is urging these buyers to act quickly. By some estimates, nearly 1.8 million home buyers will qualify for the tax credit.

Of all the positive forces in the market, however, none is bigger than price. Where a home is well-priced, we are seeing it move in record time. When the home is not well-priced it languishes on the market for months longer. Even then, it sells only after reducing to the right price. See our post later this week entitled The Real Impact of Pricing Right.

The median sales price for a Thurston County home is $242,900 this year, down 5.5% from 2008. Median sales price is down 11.5% across the 19-county area, which includes most of Western Washington, covered by the Northwest Multiple Listing Service.

As a signal that fewer pending sales become closed sales is the fact that closed sales are down 11.4% this year. The greatest obstacle to closing pending sales comes from the bank-owned and short sale properties, which accounted for 26% of our market’s sales in August. Lenders on short sales are taking anywhere from two to four months to make a decision on approving or denying the sale. It would seem that more are denied than approved given that there were only 13 short sales in August compared to 44 bank-owned homes sold.

Despite the challenges with bank-owned and short sale properties, momentum is picking up in the market. Closed sales over the past few months more closely match the 2008 results. September closed sales totaled 260, just 4 sales fewer than September 2008.

The pace of sales is slowly but steadily absorbing the excess inventory of homes on the market. We are now at 6.7 months supply of homes for sale, which is still a buyer’s market but the lowest since this time last year. The return to better balance will bring back longer-term sustainability in our market.