The pending home sales segment of the US housing market has recently dropped to a record low, a figure even worse than the one seen during the global financial crisis of 2008-2009. This news represents a major setback for the market, and may portend further volatility in the near future.
The pending home sale index, which measures the number of contracts signed by potential homebuyers but not yet closed, dropped by a whopping 13.2 percent in May 2020 compared to the same period in 2019. This decline outstrips the previous low set during the 2008-2009 financial crisis, in which pending home sales dropped a total of 7.7 percent from the previous year.
The situation is especially alarming in the wake of other economic indicators. The US economy has been largely resilient in the face of the pandemic, with unemployment stabilizing at lower rates than previous recessions. But the decline in pending home sales could represent a glaring exception to this pattern of stability.
This drop in pending home sales is indicative of a market in flux: buyers and sellers alike are uncertain of how long this period of economic uncertainty could last. Conversely, buyers may be hesitant to commit to a purchase if they don’t believe that their financial future will be secure.
The housing market will undoubtedly experience further disruption as the COVID-19 pandemic persists. Recently proposed legislation which could offer relief to struggling homeowners remains stuck in congress, an issue that many fear will prevent the housing market from recovering anytime soon.
In the meanwhile, experts are urging prospective home buyers and sellers to continue to exercise caution when taking on any real estate contract. Some tips include doing thorough research on the property, seeking out the advice of trusted real estate agents and avoiding making any decisions out of fear.
The volatility of the US housing market is perhaps the most visible sign of the economic disruption caused by the pandemic. Until COVID-19 is contained and the economic system returns to some form of stability, the market climate will remain uncertain and volatile. As such, potential buyers and sellers must remain vigilant before venturing into the current market.
