Pending Home Sales Up Again

Thurston County’s October pending home sales easily beat last year’s results. Pending sales during the month rose 14.2% to 289 sales compared to 253 in October of 2008.

October is the sixth straight month of year over year gains. This string in sales is mostly a result of lower prices. The median price of homes sold this year is now $240,000, which is down 6.6% from last year.

The median sales price in October was much lower, at just $229,450. This reflects the push by first-time buyers, who are mainly in the lower price points, to beat the clock on the $8,000 tax credit that was set to expire on December 1, 2009.

Congress has now voted to extend the tax credit and the President will sign it into law tomorrow. (See our related posts for more on the new tax credit.)

Despite the gains in pending sales, which are contracts accepted but not yet completed, closed sales dropped 5.7% in October 2009 versus October 2008. As we’ve reported in the past months, the gap between better pending sales and closed sales continues to be the short sale properties. Many of those sales are not being approved by the banks. (See our October 5, 2009 post Pending Home Sales Jump Again, Closed Sales Holding.)

The greatest level of activity is at the low end of the market. In October 60% of sales were under $250,000. By comparison, only 6% of all sales were above $400,000.

The tax credit has been credited with jump starting the low end of the market. That theory might be a bit misplaced. The National Association of Realtors estimates that approximately 350,000 people were encouraged to buy due to the tax credit. That is only about 6% of all homebuyers this year. Nearly 1.8 million people will receive the tax credit in 2009. Most people are buying for other reasons.

The tax credit is certainly giving incentive to shop. Shoppers are becoming buyers only when the price is right. Most of the price reduction activity has been at the low end of the market where bank owned and short sale properties account for nearly 50% of the sales.

The tax credit that is being signed tomorrow expands coverage beyond first-time buyers. Certain repeat buyers will receive a $6,500 tax credit. The sellers in the higher price ranges may find more shoppers as a result of this expansion of the credit. If their prices are right, those shoppers will definitely become buyers.