Pending Home Sales Up For March - Could It Be A Sign That Housing Is Recovering?

Homebuyers are back.

According to data culled from the Multiple Listing Services, the number of homes under contract increased for the second straight month in March -- additional evidence that the housing market is getting back to Business Time.

Properties in this in-between stage of the homebuying process are known as "pending" and because 80 percent of homes under contract "close" within 60 days, the Pending Home Sales Index can be a semi-reliable predictor of future real estate activity.

We say "semi-reliable" because the Pending Home Sales Index is somewhat imperfect:

1. It doesn't measure new construction sales
2. It doesn't track For Sale By Owner homes or auctions
3. Its sample set is just 20 percent of all MLS transaction

Furthermore, today's mortgage climate can be tough. Some percentage of pending home sales will ultimately fail to close because financing is unavailable.

All of that aside, the Pending Home Sales Index offers a terrific look at buy-side demand for housing, a primary driver of home values. Nationally, the index is up 3 percent from March and across the Midwest -- home to Ohio, Illinois and Wisconsin among others -- pending home sales are up 8 percent annually.

More demand leads to higher home prices over time.

When pending sales rise, it's a bona fide signal of housing market strength; we can deduce as a result that the number of active homebuyers are growing. And, why wouldn't they be? Homes are relatively cheap for people right now, mortgage rates are making them cheaper, and the government is giving up to $8,000 in incentives to people that qualify.

It's no wonder that half of March's homebuyers were first-timers.

Now, it's worth repeating -- just because the Pending Home Sales Index is on its second straight uptick doesn't mean that all these homes will necessarily close. It does tell us, however, that more buyers are finding "now" to be a good time to re-enter the market. It's this sort of insight that makes the Pending Home Sales Index worth tracking because the index points to higher home prices in the months ahead.

When buyer demand rises, the real estate market as a whole is rarely far behind.

Multiple Offers Are Common Now As New Homebuyers Compete For Rock Bottom Prices

The days of rock-bottom housing prices may be reaching an end.

According to the National Association of REALTORS, the number of Existing Home Sales fell by a modest 140,000 units last month. It's the fifth straight month in which home sales straddled the 4.5 million mark.

The national housing inventory is down 900,000 from its July 2008 peak.

These are two encouraging signs.

Meanwhile, in a separate report, the Commerce Department said the supply of newly-built homes for sale is at a 7-year low. This, too, is a positive signal for housing.

Home values are based on supply and demand. If the number of homes for sales falls while the number of buyers stays constant, home prices will rise. This is because the same number of buyers are competing for fewer properties. It's basic economics and that may be what we're seeing right now in the marketplace.

But the balance could shift further. Remember: the March housing data doesn't account for first-time home buyers that used the $8,000 First-Time Homebuyer Tax Credit. Because the stimulus package didn't pass until February, buyers on the program likely hadn't closed on their respective homes before March data was released.

There's a big piece of the demand side of the equation unaccounted for, in other words, and if you're an active home buyer now, you're probably hearing a lot about multiple-offer situations and seeing this action first-hand.

Data from the housing market hasn't been outstanding, but it's definitely not looking worse. Sales levels, inventories and home prices appear to be leveling off nationally and the number of active seems to rising.

Overall, it points to a bottoming out of home prices and a good chance higher home values ahead.

Local Real Estate Data Is Not The Same As National Real Estate Data

National real estate data helps economists identify trends in the housing market. It shapes policy and influences markets.

For active home buyers and home sellers, though, national real estate data is irrevelant. This is because national data says nothing for the factors determining home prices in any given zip code.

See, national real estate news is mash-up of data. It's 128,203,000 homes from all 50 states. Each of these states has its own economy and there are different factors that drive home values in each

Most Americans understand this.

But, if we dig deeper, we see that within those states, there are more than 19,000 incorporated cities -- plus thousands of unincorporated ones. And like the 50 states, city-to-city home values vary by economy, too.

Furthermore, each city is comprised of areas, and those areas can be broken down into neighborhoods and then sub-divided again into streets, with blocks.

It's apparent that a random home in Alabama can't be compared to a random home in California. Yet, that comparison is exactly what you're getting with national real estate data and why we can't rely on it to say "values are up" or "values are down".

Values depend on what's happening locally.

For buyers and sellers, the underlying goal is to meet at "the right price". To reach that sort of price discovery, you have to look local.

It's not as easy as it sounds.

Local real estate trends is a topic that's too narrow to be covered by the national press. It's even too narrow for local papers. Therefore, buyers and sellers have two places to turn:

* A general real estate website
* A practicing real estate agent

Using both sources for local data is common among today's buyers and sellers.

National real estate news offers little value with respect to home price negotiation. Because all real estate is local, your real estate data should be, too.

Root For The Steelers To Lose Super Bowl 43: Anything Else Is Anti-American. Don't Believe Me? Read On.

The Pittsburgh Steelers have won 5 Super Bowls in the history of its franchise and -- for the sake of the housing markets -- let's hope this year doesn't make Number 6.

In 4 of the 5 years the "Stillers" won it all, the national real estate market floundered over the 12 months immediately following their championship. Check it out:

1975: Home prices fell 1.37%
1976: Home prices rose 3.22%
1979: Home prices fell 2.84%
1980: Home prices fell 4.81%
2006: Home prices fell 3.60%

Meanwhile, let's look at the championship history of the Arizona Cardinals franchise:

1925: Home prices rose 5.2%
1947: Home prices rose by 21.3%

Clearly, this spring season's home sellers should be rooting for the Cardinals Sunday.

But, it doesn't stop there. More than a few economic analysts fingered the housing market as our nation's way out of the recession.

It's an idea that easy to latch onto. As housing prices have plunged, mortgage lending has tightened and consumer spending has gone adios.

A reversal in home prices could turn the economy around.

Therefore, aside from two major caveats -- (1) that there's no such thing as a national real estate market, and (2) that median sales price is an irrelevant statistic -- it's pretty clear: it's in America's best interest for the Steelers to lose the Super Bowl.

So, in the name of all that is patriotic and good, here's your personal plan for Super Bowl 43:

Cheer for the Cardinals, jeer for the Steelers. Anything else is anti-American.