My crystal ball says that closings in March are going to trail last year by a wide margin. Look for an article citing GHAR’s March stats to appear in the mainstream media early April, and then another one based on the Warren Group’s figures in May. Both will show a decrease in activity.
April closings will trail last year by an even larger margin than March! But most people won’t hear about that until the GHAR sourced story in May or the Warren Group piece in June.
How can I possibly know these things weeks, or even months, before they happen? By looking at the number of contracts instead of waiting for the closings.
Contracts are a very strong predictor of closings. The contract date is when the buyers and sellers negotiate the deal … when the deal comes together. The closing date is simply when all the paperwork is completed. Most closing happen 45 – 60 days after the contract was negotiated. Sure there are some deals that fall apart. And, yes, there are other deals that never seem to close. But we should be able to account for those factors in our predictions.
By the way, there are also deals that aren’t even entered into the MLS until the after a property is under contract, or even until after the closing. This doesn’t really go along with the spirit of the MLS, as a forum for advertising properties for sale, but whatever. Bragging rights are generally established via what shows up in the MLS, so some agents try to game the system. For my purposes, these private deals will work to balance out some the deals that fall apart without closing.
So that’s what will be coming in the next couple of months. Predicting a dramatic decrease in the number of May and June closings versus 2010 doesn’t even require a crystal ball. Last year’s home buyer tax credit ensured that those two months were extra-busy for closings.
If only I could figure out how to predict the lottery…
If there is a 2-3 month depression in the stock market more than 10 percent, due to the reverberations of the terrible crisis in Japan, that will also perhaps impair some people’s ability to buy if they are leveraging stock or 401k as part of their financing. I think its somewhat unlikely however, and all hoping for the best for our Japanese friends.
Definitely hoping for the best for those in Japan … hopefully the situation will stabilize soon.
It’s interesting to me how the stock market plays into buyer activity. For many buyers there is no direct impact since they’re income-based buyers (rather than asset-based) – their job allows them to buy. And since rates are attractive enough to finance as much of the purchase as possible, and low down payment mortgages are still available to those with good credit and income, there’s not always a need to find other sources of cash. However, even if a buyer doesn’t have an investment portfolio, they may view the stock market as a proxy for the economy, which impacts their confidence.
The exception here is the buyer who wants to update their property once they move in. It’s much more difficult to finance home improvements with debt these days, so even if they get a great deal on the purchase they still need cash on hand.
I think you’re right, Michael. A significant drop in the stock markets would impact buyers in that they’ll be less able to take on properties that need repairs, which is a good percentage of the inventory.