The National Association of Realtors said Monday its seasonally adjusted index of sales agreements rose 8.2 percent from January to a February reading of 97.6.  January’s reading was revised slightly downward to 90.2.

This was a nice surprise to the upside of expectations.  The adjusted index of sales rose to a reading of 97.6 vs. an expected reading of 90.3.   This index is considered a barometer for future sales activity because of the natural lag between an executed contract and the closing date (normally 30-45 days). 

Much of housing’s recent success no matter how relative is clearly due to the government’s intervention.   My concern at this point is that when this life line is withdrawn, will this create a short to mid term void of purchasers since the program basically hastens the demand of buyers who might have bought later otherwise?   As Joshua Shapiro, the chief U.S. economist of MFR Inc. puts it the jump in home sales  ”will prove temporary, and another setback will occur before too long.”

One interesting point I’d like to make on the most recent housing numbers  is on the nature of short sales at least not negatively impacting these in a way that they could. First, what is a short sale?       A short sale is a process where the home owner pleads for mercy from the bank to try to sell their home instead of having it sent into foreclosure.  If the bank agrees on a price that is less than the outstanding mortgage balance owed, then the property will be marketed as a short sale.  With that said, you may or may not be surprised to find out that real estate agents look at the term “Short Sale” as the equivalent of a cuss word.

The biggest reason realtors and purchasers alike do not like this kind of real estate product is because they take on average over 90 days to close.   Also, in addition to that the homes will be marketed for in some cases under the minimum sales price that the bank will even accept.  Therefore,  even if a buyer is aware of how the process will work, they will not know if their offer is the winning bid AND the bank might decide not to take any of the bids and just go into foreclosure anyway. OUCH!

Ok, so now that I’ve got you ready to raise the pitch fork against banks there is a very positive outcome out of this, though not on purpose by the banks themeselves.  Here it is: the clear challenges and just outright hastle of the short sale process is holding up homes from being dumped on the market in high volume by sellers and getting home buyers to look at the traditional home sale product.    If you think about it, everyone wants a deal when looking for a home, right?  Well, if short sales were priced the way they are and there wasn’t a tremendous amount of hastle then traditional homes sales would be severly injured. 

At the end of the day, since short sales are such a different animal, traditional home owners can still get a fair shake at trying to obtain fair market value for their homes….and that fact that homes are not being dumped on the market all at the same time!

Ryan Kirkpatrick