Nearly One in Four Pending Sales Did Not Close in Q1

Nearly One in Four Pending Sales Did Not Close in Q1

Let’s take a look a the latest data on pending sales volume versus closed sales volume.

For this series I roll the pending sales and closed sales data up by quarter, with pending sales offset by one month. In other words, the first quarter numbers below represent pending sales from December, January, and February and closed sales from January, February, and March.

Pending & Closed Sales of King Co. SFH

Although the gap between pending sales and closed sales had been shrinking in the second and third quarter of last year, it opened up a bit in the fourth quarter, and continued to increase in the first quarter, up to 24.1%.

It’s unlikely that this number will ever get back under ten percent with the July 2008 change in the definition of “pending,” but it is somewhat surprising to see it still at nearly one in four. Short sales aren’t really much of a factor anymore, and with as few listings as there are available on the market right now, you would think that buyers would be less likely to back out once they’ve found a home that they’ve gotten an offer accepted on.

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

7 comments:

  1. 1
    whatsmyname says:

    Have you considered the impact of new construction? Here is a place I happened onto about a week ago. http://www.pulte.com/communities/WA/maple-valley/ArborsatRockCreek/209204/index1.aspx#.U0ybaCh0aw5

    A little under 40 lots running the perimeter; a model home; about 8 houses in construction stages from foundation forms to nearly framed; plus another 40 lots with utility stubs in the interior – but no road there yet.

    Here is where it gets interesting: All of the construction and all of the completed vacant lots are sold. They will likely be building that out through the rest of the year. The unfinished lots with no road are being “released” this Saturday. Houses there will likely be completed in 2015. But if received like the first phase, they’ll all be sold in the next several months. Just this one little subdivision is adding pending sales that will hang around for months to a year, but these aren’t short sales; this is current demand being pushed into the future. This isn’t even one of the hot submarkets. You have to wonder how much aggregate similar business is spread through the Seattle metro.

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  2. 2
    Tim Deerhawke says:

    Spec builders are considered pros if they can get a contract with a long enough close to allow them to entitle the property (get plans and permits). In the case of two properties I have bought in the last year, I got 5 months to close on one and nearly a year to close on the other. Apartment, condo and commercial properties are almost always sold with a long close to allow for a MUP (master use permit). Sometimes long closes are required to do complex environmental remediation, like with former gas stations or dry cleaners. I am not sure what you think this signals.

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  3. 3
    boater says:

    I’ll add that a number of friends of mine are getting longer closes on homes due to feasibility assessments. This is primarily on land purchases but also on a few tear downs.

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  4. 4
    whatsmyname says:

    RE: boater @ 3RE: Tim Deerhawke @ 2

    These are full plats, tract homes and national builders. This is not about managing permitting, working capital, or pre-development work. That is already handled. They do have to manage their crews. Hence, if you order today, they know they can reliably deliver in, say, 9 months.

    These houses aren’t being built on spec. They have orders in.

    What this signals is a higher number of pending sales that stay “pending” for months as a matter of production capacity rather than viability resolution. This means that a higher number of them are destined to close, and will tend to buffer the seasonal downturn of immediate sales in the slower market months.

    Of course, what you guys are talking about would also tend to stretch out the pendings.

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  5. 5

    Last time this piece ran I mentioned how there was a six month supply of pending short sales. That is now a higher number, but not because there are more of them, but instead because so few were approved last month. The bank still are not processing and approving short sales. To know how that is affecting this data you would need to know the churn on the typical short sale (how many times do they go pending).

    One thing is clear from the data. Since the change in providing the pending data there is more of a seasonal factor. I’ve always said it’s better to buy a house in the winter months because you are more likely to discover water issues, and perhaps this data shows that.

    Overall the number seems to be dropping, so my question would be are people settling for houses in worse condition since the market is so tight or are sellers putting their houses in better condition before going on the market?

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  6. 6

    BLS shows a small blip upward in the Seattle/Bellevue/Tacoma 1.9M total civilian labor force base of like +20K for Feb 2014, are the jobs added permanent or will they quickly blip back down, like they did earlier this year? Are they all P/T or severely underemployed; IOWs unrelated to “qualified buyer” real estate buyers?

    BLS doesn’t say. Makes permit planning in the Seattle area similar to Ouja Board predicting.

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  7. 7
    nwerner says:

    There are currently 800 pending sales with construction dates of 2014 and an additional 353 with construction dates of 2013. There are about 6150 pending sales in King County currently. This would suggest that about 19 percent of current pending sales are new construction that is not yet complete and should be expected to have a longer than usual pending period.

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