Pending Home Sales Plummet 24.2%

by: Barry Ritholtz February 08, 2008    
Barry Ritholtz

Barry Ritholtz

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The housing market continues to spiral downward, with softness in sales and prices. As of now, the worst housing slump in 25 years is likely to continue this year, and quite likely beyond that (see also Housing Futures Fall Through the Roof).

The National Association of Realtors' index of signed purchase agreements fell 1.5% to 85.9 for December 2007. The drop in pending sales in November 2007 was revised downwards to 3% (from -2.6%).

Of course, it wouldn't be any fun if the Housing data didn't come with some hallucinogenic ramblings from the NAR, and the group did not disappoint this month.

Let's start our fisking with the WTF!?! headline: "Existing-Home Sales to Hold in Narrow Range, then Begin Upward Trend."

Well, if you think a 24% drop is a narrow range, then I guess you can make so absurd a claim. Here's the rest of their wild eyed commentary:

"A continuation of soft market conditions is forecast for existing-home sales in the months ahead, with improvement expected by the second half of this year if loan limits are increased, according to the latest forecast by the National Association of Realtors.

Lawrence Yun, NAR chief economist, said sales activity is expected to remain soft through the first half of the year despite a generational low in mortgage interest rates. “Household formation was only half of what it should have been last year given the demographics of a growing population and sustained job growth, so there clearly is a pent-up demand from buyers who are on the sidelines,” he said.

“Existing-home sales have moved narrowly since last September, but when the full impact of higher loan limits for conventional mortgages begins to impact the market there is likely to be a notable rise in home sales and prices. If higher limits are enacted very quickly, we’ll see a faster and more meaningful recovery by expanding safe, affordable financing in high-cost areas – that, in turn, would help to stimulate overall economic activity."

And as we have mentioned repeatedly in the past, it's not the monthly data, according to NAR's own methodology, but the year-over-year data that is most important to methodology of the PHSI:

"In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

'nuff said.

Narrow range my ass . . .

Previously:
No, Pending Home Sales Index Did Not Rise

Pending Home Sales Index, NAR Housing Market "Bottoms"

Sources:
Existing-Home Sales to Hold in Narrow Range, then Begin Upward Trend
NAR, February 07, 2008
http://www.realtor.org/press_room/news_releases/2008/pshi_feb08_homesalesholdinnarrowrange.html

Pending Home Resales in U.S. Fell 1.5% in December
Courtney Schlisserman
Bloomberg, Feb. 7 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDixC6BJKKEY&

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This article has 4 comments:

  •  
    Feb 08 09:29 PM
    Barry.......you are entertaining but your transparent attempts to disingenuously use statistics to make your points appear stronger is really no better than the NAR. Alright, it's slightly better but nonetheless you harm your own credibility when you play these types of games with stats.

    Let me set you straight:

    1. The 24 % drop in pending sales references year over year comparisons.

    2. The NAR forecast for a continued narrow range is forward looking and their release references a narrow range back to September. It would seem this is as good a forecast as any and bears no relationship or reference to the year over year 24% drop.

    Your disingenuous scolding of course suggests that the NAR forecast somehow includes a 24% drop, which it clearly does not as it refers back to September and going forward as a narrow range.

    My best guess is that you are smart enough to understand what they were saying, and purposely tried to make them look bad with your phony use of statistics.

    Personally I find the NAR to be distasteful and repugnant, and yearn for the day when real estate clerks get a simple .5 % for filling out the forms or better yet get nothing as people list properties and field phone calls themselves.

    Nonetheless I would hope you would be above using statistics as disingenuously as the NAR does.....but it unfortunately appears that is not the case.

    JBD.
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  •  
    Feb 08 10:47 PM
    Yes, but that's not failing to note that next month after this one is March 2008, and not February 2008. So the new home sales will certainly March on in for the real estate industry. You can't say they won't yet for sure. That closely resembles charging right in. Charging with their demographically-increa... families, who then make more families (with all the unprotected sex in their euphoric state of buying a new house), and the new families then go and buy more and more homes, and so on and so forth. So it can be expected that there are good times ahead like a mo'fo'.
    Reply | Link to Comment
  •  
    Feb 09 09:12 AM
    Those that do not believe there is a problem and everything is just fine !!!!!
    Please come to Chicago and buy my 24 listings the sellers will just love you .
    I bett you will not pay their asking price ?????
    DuffBeer
    Reply | Link to Comment
  •  
    Feb 11 04:09 AM
    Well said Barry. I have ceased to be amazed with how humorous Lawrence Yun usually sounds. Like his predecessor, David Lereah, credibility doesn't seem to be a high priority but then again I was a realtor for 14 years and learned long ago that real estate boards have a clear overriding bias and that is to help their members sell homes in every market.

    I have found the Case-Shiller Home Price Index to be a much more useful metric (see tradesystemguru.com/co... ). BTW, even the NAR admits that year-over-year results are more reliable than month-over-month statistics so the 24% drop in a year is something to pay attention to... (See tradesystemguru.com/co... )

    I would love to know how Yun can tell the public with a straight face that the existing home sales will bottom where they are now (4.9 million) and then surge to 5.8 million in the second half of the year when every metric (sales, pending homes, prices, inventories and the rate of change in GDP) are saying otherwise....
    Reply | Link to Comment
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