Could the New Low Pending Home Sales Stimulate Housing Market?

By Joe Quirk 

There was an article in the Financial Times yesterday defining some market indicators that made me wonder if we are we at a turning point in the housing market.  The article, New Low In Pending Home Sales Offsets Rally in Financials, written by Chris Bryant and Michael Mackenzie, touched on the National Association of Realtors’ announcement that pending home sales dropped to a record low 85.5. 

The fall was much higher than anticipated and an indication that sales might continue to drag in the coming months.  However, there was something else going on in the financial markets.  The S&P Homebuilder Stock Index surged as high as 8.4 per cent.  The reason,  Citi Investment Research said that now is the time to buy into the weak homebuilder sector.  Then, following NAR’s data on pending home sales, it dropped slightly and closed at 5.4 percent higher at 453.31, but still a nice high. 

Homebuilders with strong balance sheets are benefiting the most.  Pulte Homes (DiVosta), DR Horton and Beazer Homes are all prominent builders in Palm Beach County and all three builders are seeing anywhere from 5 to over 12 per cent gains in stock prices.

Does this mean new stimulation for the housing market and a recovery is in sight?  Possibly.  I’m not in the business of predicting the market and don’t have my crystal ball in front of me to give you a definite yes or no.  No one can predict exactly when we will recover.  There are too many variables.  However, we can take a look at all the indicators and see what direction the “experts” are going in.  

Past history can tell us that consumers spend when they are confident about the economy and we are seeing consumer confidence with the current gains in the financial markets.  A strong financial market and an all time low housing market makes for a breeding ground for buyers confidence to spill over into the real estate market. 

The housing market now is a buyers market.  Anyone able to buy a home or investment property should be doing their homework, researching properties and buying.  Don’t go into analysis paralysis as to whether housing prices will go any lower.  Timing the market is a fools game and you will wait forever for a lower price.  Be satisfied that you’re getting a good deal.

Always feel free to contact me if you have any questions about buying or investing in real estate.

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Filed under Buying, Economy, Financial Markets, Real Estate

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