Pending Home Sales increased by 44.3% in May, registering the highest month-over-month gain in the index since the National Association of Realtors (NAR) started tracking this metric in January 2001. So, what exactly are pending home sales, and why is this rebound so important?
According to NAR, the Pending Home Sales Index (PHS) is:
“A leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. Because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing-Home Sales by a month or two.”
In real estate, pending home sales is a key indicator in determining the strength of the housing market. As mentioned before, it measures how many existing homes went into contract in a specific month. The same holds true for RCFE homes. When an RCFE buyer goes through the steps to purchase a home, the final one is the closing. On average, that happens about two months after the contract is signed, depending on how fast or slow the process takes in each state.
Why is this rebound important?
With the COVID-19 pandemic and a shutdown of the economy, we saw a steep two-month decline in the number of houses that went into contract. This is especially true of RCFE homes, sales of which dropped to a mere trickle throughout March through mid-May. In May, however, that number increased dramatically (See graph below):
This jump means RCFE buyers are back in the market and purchasing RCFE homes right now.
Lawrence Yun, Chief Economist at NAR mentioned:
“This has been a spectacular recovery for contract signings and goes to show the resiliency of American consumers and their evergreen desire for homeownership…This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
But in order to continue with this trend, we need more RCFE homes for sale on the market. Yun continues to say:
“More listings are continuously appearing as the economy reopens, helping with inventory choices…Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”
As we move through the year, we’ll see an increase in the number of RCFE homes being built or converted. This will help combat a small portion of the inventory deficit. The lack of overall inventory, however, is still a challenge, and it is creating an opportunity for RCFE homeowners who are ready to sell. As the graph below shows, during the last 12 months, the supply of RCFE homes for sale has been decreasing year-over-year and is not keeping up with the demand from RCFE homebuyers.
If you decided not to sell your RCFE this spring due to the health crisis, maybe it’s time to jump back into the market while RCFE buyers are actively looking for homes. Reach out to us today to plan your next move. We can assist you every step of the way.
If we can be of assistance with your purchase, sale or lease of an RCFE or other property please call us today for your FREE Consultation:
Michelle (949) 397- 4506 & Melvyn (949) 500-3630