By The Tim on November 9th, 2009 at 8:15 AM · 13 Comments
On Friday I posted this graph of 2009’s pending and closed sales to demonstrate just how out of whack the two have become:
In the comments, a reader claimed that I was “reading this graph wrongly,” and that plotting the data in this manner “will always see a giant gap.”
Since there is typically a delay between when a sale goes pending and when it actually closes, this would make sense logically. Unfortunately, the data does not bear this theory out. In general, the gap tends to appear only in the spring, with pending and closed sales generally evening out in the summer and fall.
Here’s another way to visualize the difference between this year and previous years:
Six of the ten months so far this year have blown past the lowest average monthly difference in 2000-2008 (-635 in February).
If you’re interested, I have also plotted the pre-bubble years 2000-2003 individually:
No matter which way you slice it, this year is incredibly out of whack when it comes to the number of pending sales that actually turn into closed deals.
Categories: Statistics
Tags: closed, NWMLS, pending, Statistics
By The Tim on September 9th, 2009 at 12:21 PM · 16 Comments
Here’s an idea for a new occasional feature. In “quick look,” I’ll create a few charts, all depicting different takes on the same set of data. The charts will be presented with little to no commentary, to allow the graphs to speak for themselves.
This week’s theme is YTD pending and closed sales as of August.
Let me know what you think of the “quick look” concept.
Categories: Statistics
Tags: closed, graphs, NWMLS, pending, quick-look, Statistics
By The Tim on September 2nd, 2009 at 6:00 AM · 96 Comments
In the comment thread on yesterday’s post there was some discussion about the ever-growing gap between pending sales and closed sales. Here’s a simple look at how they stack up through July (since August stats aren’t out just yet):
The massive difference between pending and closed sales brings up the question: Is there really a backlog of over 5,000 homes waiting to close?
Most likely no, there is no such tsunami of closings about to crash on the shores of the Puget Sound. This growing discrepancy is probably due to a couple of factors.
First, the redefinition of what is counted as a “pending sale” last year to include homes that have merely reached the inspection point naturally means that a larger number of these pendings will not close simply due to failed inspections.
However, the larger factor is probably short sales. Hundreds if not thousands of these pendings in limbo are probably due to a buyer making an offer on a short sale, the seller “accepting” the offer (at which point the “sale” is counted as pending) and sending it to the bank, and the bank simply never replying.
It is also worth mentioning that each of these 5,000+ seemingly dead pending sales represents two parties (the buyer and the seller) that have wasted their time submitting and reviewing offers. The situation is definitely not pretty. One of my coworkers recently purchased a short sale, and he went for months without hearing anything from the seller’s agent regarding the status of their offer. It took him threatening over the phone to drive his truck through the (vacant) house to finally spur some action by the seller’s agent and the bank (not a recommended course of action)!
One suggestion that was floated in yesterday’s conversation was that the NWMLS ban short sales in their system all together unless the seller has gotten a pre-approval from the bank on the list price. This would certainly save a lot of people a lot of headaches, and would probably overall help the market to be more efficient.
Have you had an experience with a short sale that completely died? What, if anything, do you think should be done about this growing problem?
Categories: Statistics
Tags: closed, NWMLS, pending, short sales
By The Tim on August 11th, 2009 at 7:24 AM · 9 Comments
Here’s a belated look at the quarterly total sales chart, updated to include Q2:
Still came in lower than any previous quarter—about 15% lower than last year. So far this quarter is off to a stronger start, with July sales coming in 11% higher than last year. It will be interesting to see if that holds for August and September.
Next, here’s another look at the monthly pending and closed sales chart, only this time I have split the pending sales onto separate vertical and horizontal axis to demonstrate the apparent two-month lag that has shown up in the data this year:
It used to be (from 2000-2007) that a given month’s closed sales were (on average) about 95% of the previous month’s pending sales. So far this year the relationship has been closer to a given month’s closed sales coming in at 78% of the total pending sales from two months prior.
Here’s one more chart, with pending sales, closed sales, and a plot of pending sales * 78%, shifted two months into the future:
If this relationship holds for August, it looks like we’ll see about 1,900 closed sales.
Categories: Statistics
Tags: closed, NWMLS, pending, Statistics
Kevin Lisota of Findwell sent me a heads up about a rule clarification sent out today by the NWMLS to all their members:
Short Sales: Status Change Required after Mutual Acceptance
Rule 120 (b) requires the listing office to timely report the mutual acceptance of a purchase and sale agreement for a short sale as Pending (e.g. Pending, Pending Inspection, Pending Back-Up). A Short Sale property shall not remain in the Active status if the buyer and seller have reached mutual acceptance and are waiting for the lender’s consent to the transaction. The only Short Sale properties that should remain in the Active status are those properties where the buyer and seller have not reached mutual acceptance.
In other words, properties that have any offer approved by the seller and awaiting bank approval must be marked as “pending,” regardless of the known fact that many banks are taking 2-3 months just to respond to such offers, many of which are then rejected by the bank.
This rule is not new, but according to Kevin, there is “zero consistency for this practice right now.” One would assume that many agents are already doing this, causing some of the growing discrepancy between “pending” and closed sales. Of course, if there are a non-trivial number of agents out there not doing this already that begin to do so now, this will definitely artificially inflate the pending sales data even further.
Kevin points out two problems with this rule (and the NWMLS’ newly-found fondness for enforcing it):
- Your pending numbers are going to be even more messed up. Often the distressed home seller will sign anything they receive, no matter how crazy, and then submit it to the bank. (Many banks won’t even look at it without a signed contract.) If typical wait times are a 2-3 months for a response, you’ll see all of those properties marked as pending, yet they are not pending until the bank approves the transaction. To give you an example, we have a short sale buyer that is in contract with the seller. They signed an agreement for a sales price close to $300k off the list price and more than $300k being owed to the mortgagor. I believe that this price has zero chance of success, yet the seller signed it just to move things along at the bank.
- This policy is not in the best interests of short sellers. Since there is limited success getting buyer’s offers approved, particularly lowball offers, it is in the seller’s best interests to continue marketing the property to try to attract better buyer offers while they wait for bank approval. The moment you change it to pending, it disappears from websites and no one will seriously look at the property any more.
At this point, I’ll continue to report “pending” sales in our monthly summaries, but will be converting our regularly scheduled graphs to closed sales, since that is a statistic that has had a consistent definition since 2000 (as far back as my data goes).
Categories: News
Tags: Findwell, NWMLS, pending, short sales
Here are a few relevant news stories that have popped into my inbox in the last few days:
In the last article, Aubrey Cohen picks up on the pending story we explored on here a couple weeks ago. The NWMLS representative he spoke with provided the same two explanations for the pending/closed discrepancy that we independently deducted here: short sales and the NWMLS definition change.
From Aubrey’s article:
Bob Gent, director of business development and member relations for the listing service, acknowledged the definition change had an impact. In fact, he provided statistics showing that the rate of pending listings going back on the market jumped from 1.5 percent in January through May of 2008 to 4 percent in June 2008 through April 2009.
But said the change could only account for part of the recent increase in pending sales. Take out all the pending sales that went back on the market last April and this April, and there’s still a 6-percent increase.
”Did it have an impact? Yes,” Gent said. “It’s not big enough to explain the situation.”
So why are the increased pending sales not yet showing up in closed deals?
“The length of time from going pending to close has increased dramatically in the past few months due to short sales,” Gent said.
You may notice of course that Mr. Gent avoids addressing the issue of how many of these “pending” short sales simply never close. Local agent and Seattle Bubble regular Kary L. Krismer points out some common reasons why short sales are often failing to close in the P-I comments:
There are a number of reasons a short sale could fall out, including:
- Buyer gets tired of waiting.
- Bank refuses to accept unrealistically low price, and buyer refuses to pay more.
- Seller figures out that the bank isn’t going to release the balance, and that they’re better off being foreclosed.
Again, I’m not contending that sales are not increasing. In fact I have predicted that they will increase as prices continue to fall, just as they have in other parts of the country further along the bust cycle than Seattle. I just think the combination of short sales (which fail more often than normal sales) and the NWMLS “pending” definition change are overstating the increase.
Categories: News
Tags: AP, Boeing, condos, Everett, Everett_Herald, Jobs, job_growth, link_roundup, pending, Seattle Times, Seattle_PI, small spaces, Tacoma_Tribune, unemployment
