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Why Home Prices Are Almost Certain To Rise This Fall


Pending Home Sales July 2009

In what’s becoming a regular occurrence, housing data blew away economists expectations Tuesday.

As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 6th consecutive monthly gain in July.

After a meteoric rise that started in January, the index is now at its highest levels in more than 2 years.

A “pending home sale” is a home that is under contract to sell, but not yet closed. It’s not the same as an actual home sold, but data shows that nearly 80% of homes under contract close within 2 months and many more close in months 3 and 4.

Home buyers — take note. When the Pending Home Sales Index is rising, it means that market activity has picked up. This can lead to any one, or a combination, of the following:

  1. Multiple-offer situations
  2. Reduced negotiation leverage over sellers
  3. Higher home sale prices with fewer concessions

So, consider yourself alerted. If you’re buying a home in the next several months, expect the recent run in Pending Sales to lead to a run in closed sales, too. That should lead home prices higher in most markets.

Indeed, we’re already seeing it. Case-Shiller says prices are on the upswing.

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