Last month we started a monthly Pending Sales post and we appreciate very much the email feedback and questions we received. Granted the post was not very clear on how valuable this statistic may be for predicting near-term market performance. Thus this month we have changed our original accompanying chart to more accurately reflect the relationship between pending contracts and actual closed contracts for Huntsville Real Estate transactions.
To understand this relationship it is important to look closely at the following chart:
Huntsville Home Sales – Pending vs Closed
In the chart Pending contracts are tracked month-to-month in red-brown while actual Closed contracts are tracked in black and both for the last 3 1/2 years. The first thing to notice is that for the first half of 2006 Pending contracts actually out numbered Closed contracts. Since Pending contracts are a leading indicator of Huntsville Real Estate sales their upward and downward movement is often times reflective of what will actually happen in the local market over the near term.
Also notice that throughout 2007 Pending contracts began to lag Closed contracts and the larger the divergence between Pending and Closed contracts the stronger the leading indicator becomes. From Aug – Dec 2007 the divergence became very large and thus accurately reflected the slow down in Huntsville Real Estate sales that we have experienced over the last two years.
On the bright side however is the shrinking of this divergence since Nov 2008 to the point in April – May of 2009 that the downward divergence is the least it has been in two years. Does this mean that once again the Huntsville Real Estate market is headed toward sales growth? Likely this indicator is not so positive, however what we could very well be witnessing is the formation of a bottom and leveling off of the local market.
We will be watching this indicator with interest over the next few months and we will keep readers posted.