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Leading Indicators, Bonnie Tyler and Signs of “Turnaround” Tags: Market Data

As a team that follows that market pretty closely, every now and then we get a little bit nervous, a little bit restless. Some are thinking that maybe the best of all the years have gone by. But then we see the look in the charts that we need now more than ever. Together we can take it to the end of the trendline. Once upon a time we were falling in sales, a total eclipse of the buying frenzy from the last few years. But every now and then the Federal Reserve also gets a little bit restless, inflation like a shadow on them all the time. As Bonnie Tyler referenced in 1983, a turn around could be upon us.

Forgive us for that, but hopefully you get the point.

You’ve also likely noticed that pending sales can serve as a leading indicator of closings. For three months (Dec, Jan, Feb) we’ve seen year-over-year gains in pending sales (signed purchase agreements that haven’t closed). We’ve seen two months of year-over-year increases in closed sales as well. Together, these could be signaling a recovery of demand in the marketplace. Moreover, looking at not just the number of closed sales but the actual change in sales and whether that is accelerating or decelerating can also provide powerful insights into what might be coming next. And who wouldn’t want to be able to see around corners? Following pending sales and the acceleration or deceleration in activity can offer somewhat of a glimpse into the future. At the risk of stating the obvious, the declines usually slow before we see gains. Note the slowing rate or magnitude of declines as the red bars approached the zero mark before moving into positive blue territory.

Can we say with certainty the worst is behind us? Not quite. But it sure looks like it could be. Factors like inflation, recession, rate cuts, personal finances and more can all impact this. We sometimes say “once is random, twice is coincidental, but three or four times is becoming a pattern”. We’ve seen three consecutive months so far. It’s also important to note that three months of gains doesn’t get us back to 2020 and 2021 activity levels. Also note that year-over-year increases in the median sales price have been accelerating as well. Lastly, even the rolling 12-month sales trend in Infosparks is showing signs of curling upwards. Individually, these wouldn’t be as compelling as they are when they’re all singing the same tune together. Think of it as “trend confirmation” from several different data points. When you layer in supporting anecdotes from agents in the community, the story becomes even more compelling.

To channel Bonnie Tyler one last time, this is a “total eclipse of the chart.”