A surge in sales contracts signed in October announced by NAR yesterday that inspired hopes of a fall boomlet actually will problem have no impact at all on closed sales.
Pending sales rose 10.4 percent to 93.3 in October from 84.5 in September and is 9.2 percent above October 2010 when it stood at 85.5. Estimates for pending home sales ranged from a drop of 2 percent to an increase of 5.6 percent, according to a median 2.0 increase in a survey by Bloomberg.
However, in October 33 percent of Realtors reported that a plague of problems ranging from low appraisals and inability to get financing killed their most recent sales contracts.
Settlement problems have been increasing since May, but shot up dramatically in September, when it 18 percent of Realtors reported failed contracts. In October, one out of three said they had recently lost a pending sale, according to NAR’s Realtor Confidence Index survey. At the current rate of increase, settlement failures will wipe out the October gain in pending sales.
“Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions,” he said. Lawrence Yun, NAR chief economist, said improved contract activity is a hopeful sign.
Last week Yun said, “Many people who are attempting to buy homes are thwarted in the process.”
In October, only 47 percent of contracts settled on time. Twenty percent were delayed a month or more, 9 percent failed because buyers count not get financing, 4 percent had low appraisals or home valuation problems, and 20 percent encountered other problems, according to the NAR survey.
“Although contract signings are up, not all contracts lead to closings. Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one,” Yun said. “Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close the margins of qualifying, or they might get a loan but with less favorable terms.”