Despite rising interest rates, 2017 may not be that bad for housing. In a recent report released by the National Association of REALTORS® (NAR), numbers remain strong for pending home sales prompting a positive prediction for the incoming year.
Home buying is strong and competition is tough, says November 2016’s Pending Home Sales Index as it passes its benchmark value for the 31st month now.
What is “Pending”?
A home sale is considered pending once it goes under contract between a buyer and a seller. In simpler terms, once the buyer signs the sale contract, the property is considered on “pending” status. It is on the process of being sold, although a pending sale is not a guarantee of actual sale. “Pending” means the seller has an offer but has not closed yet.
Once a property goes on pending, there is still a chance it could go back to being for sale again. An example of this is when the potential buyer cannot get the necessary financing for the home, or when the inspection does not check out.
The Pending Home Sales Index (PHSI) published by the National Association of REALTORS® measures properties that are pending or under contract but are not yet closed.
Unlike most housing market metrics, the PHSI is a forecast measure, projecting future home sales. According to NAR, 80 percent of pending homes close within two months of contract.
The Pending Home Sales Index for November read at 107.3 which is a 2.7-point decrease from October’s. However, the number remains well above the index’s benchmark score of 100.
So is this a big deal?
Experts say indeed. Beating the baseline apparently indicates that the housing contracts are going at an exceptional rate. This, in comparison to the pace in 2001, which is generally agreed by the professionals to be a year of good fortune.
In the Northeast region, PHSI marched +5.7 percent from a year ago. In the Midwest, it decreased by 2.4 percent from the previous year. Meanwhile, the index declined by 1.3 percent this year in the South, while the West also records a -1.0 percent compared to 2016’s.
Rising home sales, low housing inventory, and loosening mortgage guidelines are seen to be major drivers for these numbers. If rates continue to go up, buyers think it’s wiser to lock in now than wait for mortgage rates to continue shoving forward. The boost is also fueled by more mortgage approvals, thanks to mortgage products that are becoming more friendly to mortgage applicants.
If you are planning to purchase a home or refinance, you might find it difficult to get a good deal owing to the competition in the market. Nonetheless, 2017 could be a smart year to invest and put your plans to work.