Pending Home Sales Index, NAR Housing Market “Bottoms”

The National Association of Realtors Pending Home Sales Index has been released, and it is once again, an exercise in spin.

Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise
Over the next few months, existing-home sales are expected to hold fairly steady as indicated by pending sales activity, then rise later in the year and continue to improve in 2009, according to the latest forecast by the National Association of Realtors

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in November, fell 2.6 percent to a reading of 87.6 from a strong upward revision of 89.9 in October, but remains above the August and September readings and indicates a broad stabilization. The index was 19.2 percent below the November 2006 level of 108.4.  “Although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,” Yun said.

As we previously noted in December, the year-over-year data is what matters, not the monthly changes. This release revealed a 19.2% drop in the index from last year, forecasting not stabilization, but even greater slippage.

However, since the NAR insists on including their cheerful forecasts (i.e., spin) with each data release, why don’t we review their prior prognostications about the Real Estate and housing markets, via Jim Stack’s Investech.  Jim writes:

"Most bear markets in stocks result in
investors feeling as if they’re being sandpapered to death. Two steps
down are followed by one step up… then another two steps down.
Meanwhile, each and every step is accompanied by reassurances that a
bottom is at hand and the outlook will soon improve

This has been the same case for the 21⁄2 year-old bear market in
housing. And perhaps there is no better source for tracking and
understanding the psychological roller coaster of the housing bear
market than the National Association of Realtors itself.  As you step
through these media headlines and NAR quotes of the past two years,
it’s easy to recognize the path has been one of denial, unexpected
downward revisions, and erroneous reassurances…"

As proof of this, check out the various quotes Jim gathered from the NAR themselves:

August 2005:

“All of the doom and gloom forecasts of a housing debacle are not only irresponsible, but also downright wrong.”
–David Lereah, National Association of Realtors

April 3, 2006:

Feb pending home sales index down 0.8 pct: NAR

Pending sales of U.S. homes edged lower in February, but a big upward revision to the previous month’s data may suggest the housing market’s cool-off period is nearly over, [the National Association of Realtors] said on Monday.  – Reuters

NAR: “We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations.”

June 27, 2006: 

Sales of Existing Homes Fall in May

Sales of existing homes fell for the third time in the past five month in May, with the weakness led by a big drop in demand in the Northeast.  The National Association of Realtors reported that sales of previously owned homes dropped by 1.2 percent in May to a seasonally adjusted annual rate of 6.67 million.  – Yahoo! news

NAR: “Right now we are on course for a soft-landing in housing.”

October 25, 2006

Homes sales, prices drop in September

The National Association of Realtors said sales of previously owned homes fell 1.9% in September to a seasonally adjusted sales pace of 6.18 million units, slowest sales rate since January 2004.  – Associated Press

NAR: “The worst is behind us, as far as a market correction – this is likely the trough for sales. When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.” 

December 4, 2006:

Pending Home Sales Tumble

The National Association of Realtors’ index for pending sales of existing homes decreased at a seasonally adjusted annual rate of 1.7% to 107.2 from September’s 109.1, the industry group said.  Its index, based on signed contracts for used homes, was 13.2% below the level of October 2005.  – Wall Street Journal

NAR: “It’s important to focus on where the housing market is now – it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high – they’ll stay that way through 2007.”

February 15, 2007:

Record home price slump 

The slump in home prices was both deeper and more widespread than ever in the fourth quarter, according to a trade group report Thursday.
– CNN/

NAR: “At least the bottom a ppears to have already occurred.  It looks like figures will be 

June 6, 2007:

Home Sales, Prices to Slip Further in 2007: NAR 

Home sales and prices will fall at a faster pace in 2007 than originally expected, a leading U.S. real estate trade  association said on Wednesday.   – Reuters 

NAR: “Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year.” 

August 8, 2007:

Existing-Home-Sales Forecast Lowered 
In its latest forecast for the real estate market,

NAR on Wednesday projected that existing home sales will fall 6.8%  this year to 6.04 million, compared with its previous forecast of a 5.6% decline.
– Wall Street Journal

NAR: “Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who’ve been on the sidelines.” 

October 10, 2007:

Realtors group lowers sales forecast 
The decline in sales of existing homes this year will be steeper than previously anticipated, a trade group for real estate agents said Wednesday.  The eighth straight downwardly revised forecast from the National Association of Realtors calls for U.S. existing home sales to be 10.8 percent lower than last year as housing market struggles persist.  – Yahoo! news 

NAR: “The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels…” 

November 15, 2007:    

Realtors revise home sales forecast lower again 
The National Association of Realtors said Tuesday that sales of existing homes in the U.S. are expected to decline to a five-year low this year, and the outlook for 2008 is worsening.  – USA Today 

NAR: “It is possible for even higher home sales activity than we’re forecasting if buyers regain 
their confidence.” 

December 10, 2007:

Housing market is stabilizing, optimistic Realtors say 
Bucking conventional wisdom, a trade group for real estate agents said Monday that the battered housing market is on the verge of stabilizing and inched up its outlook for 2007 and 2008 home sales.  The revised monthly forecast from the National Association of Realtors, which followed nine straight months of downward revisions, calls for U.S. existing home sales to fall 12.5% this year to 5.67 million – the lowest level since 2002.
– USA Today

Jim adds that "the value in reading this chronology of missteps lies in maintaining one’s objectivity going forward. Based on building permits (at 14-year lows), housing starts (also near 14-year lows), and NAHB Builder Confidence (hitting 23-year lows), it is far too early to proclaim that a bottom is at hand or housing has stabilized."

Indeed . . .



Sailing Deeper Into Uncharted Waters 
Jim Stack
Investech, DECEMBER 14, 2007

Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise    
National Association of Realtors
January 8, 2008

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What's been said:

Discussions found on the web:
  1. Sean commented on Jan 8

    Can NAR be sued for issuing public lies to lure unsuspected people into buying a home?

    Talking about the Realtors on your side, this NAR just keep on lying. It’s very sick.

  2. cinefoz commented on Jan 8

    One thing that is rarely mentioned is the cost of a house relative to the price of the house. Sure, unimproved land is negotiable as is the price of an unsold, completed home.

    Is there any easy to understand reference available that would clearly explain in accounting terms how the cost of a new home relates to the price of the home?

    Once the cost structure of real estate is understood, a meaningful analysis of the industry can be started.

  3. Brian B. commented on Jan 8

    Br, thanks for that. I needed a good laugh today! I forget the monthly idiocy of the N.A.R. forecasts. I was in the business and got out in late 2005, when I saw that the top was in. It appears that they still dont want to admit that even IF (big if), “there are pent up buyers out there”, the loans that fueled the housing boom no longer exist. Face the facts, housing prices will still go lower. How much? I don’t know, but obviously if employment starts to unhinge further there is no telling.

  4. Ross commented on Jan 8

    Press release from the spokesman for Le Grand Armee “The fires in Moscow appear to be contained. Napoleon welcomes the cold weather in so far as it will hinder the Rag Tag Russian Cossocks and allow for an orderly withdrawl to France.”

  5. UrbanDigs commented on Jan 8

    these guys have NO credibility 3 years housing will turnaround, and the NAR will be there to state: SEE, WE TOLD YOU!

  6. Stuart commented on Jan 8

    “Can NAR be sued for issuing public lies to lure unsuspected people into buying a home?”

    I sure as hell hope so. Their repeated mantra of a housing bottom is similar to Paulson’s repeated mantra of believing in a strong dollar policy. Both of zero credibility.

  7. Michael C. commented on Jan 8

    I think this housing data will always be tainted to the point of useless.

    What I monitor is the inventory/sales of a few areas of interest, interest rates, and mortgage apps. From this, it gives a pretty clear picture of the housing market for me.

    Currently, I don’t see any sign of change whatsoever. Inventory has slightly decreased due to the winter, but up year over year. Rates aren’t helping or hurting much, and mortgage apps aren’t seeing much change either.

    So far much of the same. What I will be watching is the increase of inventory come spring. If the inventory outpaces sales, yet again, it will be much of the same as last year.

  8. michael schumacher commented on Jan 8


    Moody’s has been a busy boy today…….ironic that they cut the ratings on BSC tranches AFTER they know that Cayne is on his way out…..


  9. Eric Davis commented on Jan 8

    also OT:

    KBH has 2 years worth of housing lots, not including options on lots.

  10. ken commented on Jan 8

    Barry your claim that a price drop of over 19% year over year is a sure fire indication that prices will fall further is pretty ignorant. I’ll give you the benefit of the doubt and assume that you may not have meant what you actually said.

    You must know that short term price activity is a better indication of trend changes than is long term price activity.


    BR: Ken,

    You are misunderstanding this discussion. That’s a reference to the NAR methodology for using the PHSI.
    See the link above

  11. The Dane commented on Jan 8

    Funny article, something else is also funny, in danish NAR means fool.

    NAR is living up to its name!

  12. Vermont Trader.. commented on Jan 8

    Well, sales will go back up again someday.

    Investors will buy houses when they can be rented to people at a nice profit without taking future capital gains into account. Markets tend to overshoot going up and down so I suspect there will be some nice investments oportunities with fat cash flows in a few years.

    The house across the street from me is for sale and its price needs to drop about 40% before it would be worth the hassle vs. buying a bond.

  13. Charlotte Real Estate – Terry McDonald commented on Jan 9

    The best market numbers now seem to be coming from Radar Logic, the new firm working with the WSJ. They have real leading and trailing indicators, condominium market numbers, and they watch 25 MSA’s.
    You should know that NAR has been useless to the Agents it pretends to serve as well. I’ve cut and pasted their quote to our office bulletin board, we need to all welcome them to the “reality-based” community… it would be funny if not so…

  14. Doug commented on Feb 22

    Housing remains quite expensive relative to “intrinsic” value. I suspect that the decline in house prices will continue until the opposite is true. Buyers have no incentive to enter the market (and even as price and intrinsic value converge, the possibility of purchasing later at a lower price turns out to be a very significant incentive to wait).

    The “big picture” question as I see it is will the effect of retiring boomers, confronted with lower income and falling asset prices and savings, together with credit contraction from excessive leverage and weakened financial institutions lead to a significant decline in overall economic activity and even deflation.

    This contraction seems eerily similar to that in Japan from 1989-2004. Even today, stock indices are 60% below peak.

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