Pending sales are down, sharply, says the National Association of Realtors. (1) This from a report released this week showing that the adjusted pending home sales index fell to 101.6, the lowest level in nine months and below levels seen one year pending home sales downago. That hasn’t happened in almost 2 ½ years. What does that mean for the real estate investor?

A pending home sale is just that; a sale that is expected to occur at a given point in the future. Pending sales don’t equate to sales, but the number of signed contracts indicating a commitment to buy. Sales contracts can fall out for a variety of reasons including appraisal or property condition issues and lower pending sales indicate a softer housing market and in this instance, a sharper than expected drop is forecast for September and October home sales. Why the lag?

Interest rates did increase over the summer yet they began slight decline in August and are still near relative lows. Home values have also increased slightly in most markets across the country yet it doesn’t appear that a rise in values had much of an effect on newly signed sales contracts.

It’s likely, although difficult to substantiate, that the pre-shutdown chatter that pounded the airwaves for the entire month of September kept potential homebuyers on the sidelines. The October 1 “deadline” to fund the government with a continuing resolution and an increase in the debt limit caused investors of all stripes to take notice and proceed with a bit of caution and this timidity certainly was in the forefront of buyer’s minds.

The reports of impending economic doom, which never happened, from all types of media will cause anyone to put a little more thought into making a commitment the size of buying and financing real estate. If that’s true, then the seasonally adjusted pending sales numbers for October should show a bounce.