Pending Home Sales Have Some Investors Worried

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MarketWatch.com reported pending home sales fell 4.7% in the month of January, according to the National Association of Realtors. That number was reported as the lowest for quite some time and that has some worried. MarketWatch.com went on to report that there are signs of people wanting houses, but the current inventory is low.

When this event occurs, it is a simple supply and demand issue that will drive prices higher. We all remember in the not so distant past the effects of over inflated home prices, although there were many other moving parts involved with those. Investors also have to keep in mind the market has been on a 10-year bull run, which may worry people as well. The recent correction over the last couple weeks was probably welcomed, but the market recovered as quickly as it dropped.

REIT’s or real estate investment trusts are something too watch as well should home sales continue in their current path. Each trust is different but even the ones that focus on corporate properties could be affected by what is going on in the consumer market.

What separates 2008 from now is the in 2008, there were many different securities involved that used the mortgage as the collateral. It was believed that everyone paid their mortgages and investors were lulled into a false sense of security. However, when prices continued to rise and people who were unqualified got loans and began purchasing more, when rates changed on the subprime loans, the people were unable to pay and the dominos began falling.

Going forward, investors should be cautious of the housing climate because it could be an indication of a potential market slow down or pull back. Remember, we have been on a bull run for nearly a decade and there could be come signals of a market turn around. Housing plays a large role in the United States economy but keep in mind that there are many moving parts.

According to CNBC.com, pending home sales in the Northeast fell 9 percent for the month and Midwest Sales fell 6.6 percent. South was down 3.9 percent and the west was down 1.2 percent. This is only for the month but these are numbers not seen in quite some time. No need to over analyze, but rather keep a watchful eye on the market conditions.

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