Pending Home Sales Are Stuck In The Mud

Pending Home Sales Are Stuck In The Mud

Investor · Fort Lauderdale, FL · Member since 2013 · 917 posts · 607 votes

More “bad news” for the housing market. . .if you see the glass as half empty.

From my perspective, the cup runneth over.

Pending home sales barely moved in August. Just +0.3% from July.

But they were still down 4.7% from a year ago and are running roughly 30% below pre-pandemic levels.

Meanwhile, existing-home inventory has climbed to 1.62 million homes.

That’s 4.9 months of supply, the highest level in more than a decade.

And mortgage rates start today at 7.2%

Do the math: more houses + fewer buyers + high borrowing costs =

Sellers who cannot get their houses sold the old-fashioned way.

When traditional transactions stop working, somebody has to find another way to make the numbers work.

Maybe the seller doesn't need to sell today. Maybe they need income. Maybe they need their asking price.

Or they need to move but don't want to become a landlord.

Perhaps the buyer can't qualify for today's mortgage.

That's where creative real estate comes into the picture.

Lease options

Cooperative Assignments

Seller financing

Different problems require different solutions.

The point isn't to force a deal into the traditional “buyer gets mortgage. . .seller gets cash. . . transaction closes” box.

Instead, ask

“What does each party actually need, and is there another way to structure the deal?”

The worse the conventional market gets,

the more valuable creative thinking becomes.

That's not necessarily bad news at all.

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Englewood, NJ · Member since 2018 · 464 posts · 88 votes
1w

Michael, seeing this from down here in Broward County and you nailed it about creative solutions. The conventional market IS stuck - pending sales here are no different than what Rob is seeing in Louisville.

But here's what's interesting on the ground: the properties that CAN'T sell through traditional channels are creating opportunities elsewhere. I've been buying at tax deed auctions locally and the amount of distressed inventory coming through is directly tied to this exact problem - owners who can't sell at the price they want, stop paying taxes, and eventually the county takes it.

Jay's point about the 70s and 18% rates is spot on. Everyone who got used to 3% money is acting like this is unprecedented. It's not. What IS different is that today's stalled sellers have way more equity than they did back then, which means there's room to make deals work if you approach them with the right structure.

The creative toolbox Michael mentioned - seller finance, lease options, subject to - those aren't backup plans anymore. In this rate environment they're becoming the primary deal structure for a lot of investors who can't get traditional financing to pencil.

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  • Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes
    1w

    Matches what I'm seeing locally, maybe a sharper version of it. Louisville's pending sales were down 26.3% YoY in August, even with active inventory up 33% YoY and new listings up 3.5% YoY. So it's not that buyers vanished or sellers dried up — new listings prove people are still willing to sell. It's the conversion from listed to under-contract that's stalling. Days on market climbed to 46, up 21% YoY, too. Reads like both sides are waiting for the other to move on rate or price before signing anything, which tracks with your "stuck in the mud" framing better than an actual demand collapse would.

  • Investor · Fort Lauderdale, FL · Member since 2013 · 917 posts · 607 votes
    1w

    Yeah, it seems like a battle of wills. Sellers are convinced another wave of motivated buying insanity is right around the corner. Buyers are convinced prices will drop. I'm with the buyers on this one.

    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1w

      I started my RE sales career in 75 and worked through the carter years of 15 to 18% interest rates.. for me I specialized in Land sales and it was all 100% owner financing . On top of that I took listings where I could offer 10% down and I took my commish in monthly payments from my sellers as they got paid.

      Not all deals but many and over the course of a few years I had created quite a nice monthly cash flow on trailing commissions.. Its quite a foreign concept for agents to not get paid at closing but your talking getting creative and thats what I had to do to maneuver those very tough years.

      Also thats when I started doing Sub to in earnest for our own portfolio did hundreds of them ( again land not houses) did not have the time or patients to work with appraisers banks and inspections.. Land was much easier at the most it would be check well logs and get a perc test.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    1w

    Also you see so much of the headlines RE is too expensive we have to help first time home buyers and other etc etc.. OK this is what helps them slow the market down and have price compression.. I get the interest rate issue but historically rates are about where they were maybe a point higher than in say 2000s

    short memories or un realistic expectations of 3 and 4% mortgage money.

    many wont know this but in the old days when I started there was no on line amortization schedules you googled we had a book and it had interest rates started at 5 to 6% there was never a thought that rates could or would be lower I still have mine that are now 50 years old.. And the rates in those books went to 18%

  • Englewood, NJ · Member since 2018 · 464 posts · 88 votes
    1w

    Michael, seeing this from down here in Broward County and you nailed it about creative solutions. The conventional market IS stuck - pending sales here are no different than what Rob is seeing in Louisville.

    But here's what's interesting on the ground: the properties that CAN'T sell through traditional channels are creating opportunities elsewhere. I've been buying at tax deed auctions locally and the amount of distressed inventory coming through is directly tied to this exact problem - owners who can't sell at the price they want, stop paying taxes, and eventually the county takes it.

    Jay's point about the 70s and 18% rates is spot on. Everyone who got used to 3% money is acting like this is unprecedented. It's not. What IS different is that today's stalled sellers have way more equity than they did back then, which means there's room to make deals work if you approach them with the right structure.

    The creative toolbox Michael mentioned - seller finance, lease options, subject to - those aren't backup plans anymore. In this rate environment they're becoming the primary deal structure for a lot of investors who can't get traditional financing to pencil.

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