One in Six Q4 Pending Sales Didn’t Close

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 fourth quarter numbers below represent pending sales from September, October, and November and closed sales from October, November, and December.

Pending & Closed Sales of King Co. SFH

As of the fourth quarter, just over one in six pending sales (17.5 percent) failed to ever show up in the closed sales numbers.

This number is continuing to move closer to zero, hitting its lowest level since early 2008. The only quarter that has seen pending and closed numbers closer together was Q3 of 2013, when the difference hit 17.2 percent.

As hot as the market is right now, it’s surprising to still see one in six pending sales fail to close in King County. My current theory is that it’s the result of buyers who jump in quickly to win a bidding war but then back out during the inspection or financing period.

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

12 comments:

  1. 1
    Dave0 says:

    I have no evidence to back this up, but I bet they don’t close because the buyers can’t secure financing. When I bought a condo last September getting financing was a gigantic hassle, and I have perfect credit, put down 50%, and enough income that I didn’t bother including my wife on the loan. I couldn’t imagine how hard the process would be for a typical buyer.

  2. 2

    RE: Dave0 @ – You might very well be right that lending is the issue, but that’s not because loans are so difficult. Unless there’s an issue with the property, it’s because so many lenders are incompetent.

  3. 3

    RE: Kary L. Krismer @ – I should have said “so many loan originators are incompetent.”

  4. 4
    FlipperInSeattle says:

    I’ll second the loan “challenges” – it seems like the folks originating loans are getting worse and worse.

    And it is going to be downright hairy when the next round of CFPB changes come late summer/early fall. borrowers being required to get docs 3 days before signing, more notices/docs from closing agents, no more table funding… it’s going to add another week to closings for a while…

  5. 5
    Rudolfo says:

    This is a very interesting observation that baffled me at first read.

    “buyers who … win a bidding war but then back out during the inspection or financing period”
    I suspect you are right.

  6. 6

    RE: Rudolfo @ – Often, but not always, bidding wars result in pre-inspections and waivers of inspection. Also unlike the inspection contingency, you can’t just back out based on a financing contingency, because you have a duty to try to get financing. But bidding it too high can result in the property not appraising. I had a bidding war situation where we made the buyers remove the appraisal provision of the financing contingency (they were all putting far more than 20% down). Sure enough, it didn’t appraise.

  7. 7

    RE: Dave0 @

    Yes, It’s Even Affecting HOAs

    The banks would give them maintenance loans in the recent past based on their dues incomes. Now, the banks want collateral, even attempting to put unsuccessful/illegal liens on the HOA’s units where I live for maintenance loans. Its turning into the 50s, when home loans required the same personal wealth to back them up. I find this refreshing BTW, we can’t afford another bank collapse.

  8. 8

    RE: FlipperInSeattle @

    I Agree With You Too

    We’re watching America [and the world] morph into a country with skills, mentoring, and job experience get replaced with engineers working at Radio Shack [until they declared Chapter 13 recently] and RNs washing tables at Applebees. I imagine the banks have a skill shortage in knowledge too. Couple this with a bi-lingual anchor and you get businesses run by the village idiots [pardon my pun].

  9. 9

    RE: Rudolfo @

    Yes, I Noticed It On HUD Homes in the 80s Too

    It hasn’t changed in 30 years in the Seattle area IMO….everyone wants to own a Seattle home, but very few household qualify for the loans. Now its getting worse.

    The old HUD homes we’re “bid up” by unqualified buyers, their offers rejected by banks and the same units either got stagnant or some village idiot with enough income/cash went way too far in debt buying it….thinking the price was real. I’m sure today’s HUD Homes have the same problem, but lower wages have mitigated it.

  10. 10

    RE: softwarengineer @ – I remember HUD homes in Seattle in the early 70s, or maybe even the late 60s (Probably around the Boeing bust). They’d go in an really fix them up, sort of like what Fannie started doing fairly early on in our recent downturn. I even remember them upgrading the wiring on some.

  11. 11
    Maxim says:

    Is there any data on pending sales not going through for just Seattle? I wonder if it differs significantly from King County data (Seattle market is hotter and it might support Tim’s theory on buyers jumping in too quickly).

  12. 12

    RE: Kary L. Krismer @

    Yes Kary

    Everything was better in the “heydays”.

    The marriage rate was very high among Baby Boomers in the late 70s….two incomes trying to keep up with 15% home interest rates and a doubling of home prices…when everything went to pot in Seattle.

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