Pending home sales fell 10.6% in February. here’s why

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Talk to someone looking to buy a home today, and you’ll likely spot a similar pattern – there just isn’t enough inventory. In fact, this explains why pending home sales fell 10.6% in February compared to January, according to the National Association of Realtors. Not only has there been a huge overall decline, but every single region of the country has experienced a decline.

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What are the pending home sales anyway?

If you are looking to buy a home, you might hear the term “pending sales” all over the place. This is the number of dwellings for which a contract has been signed, but the agreement has not yet been concluded. It can take weeks, or even months, from when a home is under contract to when the sale is actually closed, as mortgage lenders often need 60 days to complete a home loan. But one thing you need to know is that pending home sales are a good way to gauge the state of the housing market.

Why are pending sales declining?

When pending home sales decline, it can happen for a number of reasons. In some cases, it may come down to a lack of demand from buyers. But this is not the case today. Relatively low mortgage rates are still pushing buyers to search for homes at a rapid pace.

On the contrary, the reason that pending home sales are down is that there is not enough inventory for everyone. At the end of February, there were only 1.03 million homes available for sale. This is a decrease of 29.5% from the previous year and the lowest supply on record. And that’s also why so many buyers are struggling in today’s market.

How to navigate a tight real estate market

Pending sales are therefore down. OK. But how does this affect you individually?

Well, that probably means that there isn’t a lot of inventory to choose from, and that when homes in your area to do get to the market, there will probably be a lot of competition. A few strategic moves on your part, however, could give you a leg up on other buyers.

On the one hand, opt for mortgage pre-approval. This sends the message that you are a serious home buyer who has already been approved by a lender and that you are less likely to have a hard time getting the financing you need to complete a home purchase.

Then be prepared to go well above a seller’s asking price for a home you really want. In a competitive market, making an offer that a seller can’t refuse could help you avoid a bidding war with other buyers.

Finally, be flexible with the things you will do and not compromise. In a tight market with limited homes, you might not find a property that verifies every item on your list. Decide which characteristics are most important and be prepared to bow to others.

Will pending home sales increase in the coming months?

The increase in pending sales in the short term will largely depend on the number of new homes put on the market. Between the spring weather, coronavirus vaccinations and the recovery of the US economy, more sellers could be motivated to list their properties in the coming months. If this happens, we can expect sales to increase as there is clearly no shortage of buyer demand. On the contrary, right now the main thing holding buyers back is not having any homes to buy in the first place.

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