October 24, 2019

Sharp drop in new pending sales not enough to derail trend upswing

September’s pending home sales trend continued increasing despite a sharp drop in approved contracts.  There were 758 new contracts last month, down from an adjusted 942 in August.

The month-over-month change in the moving average employed as a trend tracking metric was up 1.4% and up 17.7% when compared to September last year. The active pending sales total rose to 1,430 – 110 more than August, according to Realtor Property Resource (RPR). New contracts are those approved in the reporting month while the active pending sales total includes all that have not moved to closing.

Pending sales are a leading indicator of housing activity based on signed contracts for existing single-family homes, condominium, and townhome resales. Since resales go under contract a month or two before the deal is closed, the index typically leads existing home sales by about two months.   Under normal market conditions, it’s not unusual to see up to 5 percent of contracts fall through. In today’s market, that fall-through rate is often higher due to contract contingencies.

Less than half of the approved contracts (48 percent) moved to closing last month.  Approximately 70 percent of new contracts face a contingency that has to be completed before moving to closing.  The most common contingencies are home inspections (60 percent), obtaining financing (48 percent), and an acceptable appraisal (47 percent).

To date, new listings are 5.9 percent better than the first nine months of last year while new pending sales are up 20.2 percent.  The region had 3.3 months of inventory in September. “That means the market’s sales pace continues to absorb inventory faster than it is being replaced,” according to NETAR data analyst Don Fenley. September’s inventory was the lowest it has been since NETAR began reporting its monthly housing market report in 2008.

NETAR - the voice for real estate in Northeast Tennessee - is the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,300 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends reports, and the regional market analytics can be found on the NETAR websites at .