Pending Home Sales Down 19.6%

The hallucinogenic spin-meisters over at the National Association of Realtors are once again, misstating what their own data indicates:

Flat Existing-Home Sales Likely Before Gradual Recovery
The volume of existing-home sales is expected to hold steady through late spring, with a gradual recovery during the second half of the year as the mortgage situation improves in high-cost areas, according to the latest forecast by the National Association of Realtors.  Lawrence Yun, NAR chief economist, said many buyers have been waiting for higher mortgage loan limits.  “The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions,” he said.  “Therefore, a notable rise in home sales can be anticipated in the second half of the year."

This statement reflects a combination of wishful thinking and factual misstatements. Let’s review the specifics.

First, the Pending Home Sales Index fell 19.6% from year ago levels. This is hardly a "flat" number, as described by their PR release. This is significant, as the NAR itself notes in the footnotes to their The Pending Home Sales Index: 

"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."

Hence, the data that matters most is not the change from December to January, filled as it is with seasonal anomalies, but  rather, the January 2007 to January 2008 comparison. That showed almost a fifth lower than the prior year’s index.

When we consider the rest of the data that’s out there, its apparent that stabilization is not the correct word:

U.S. foreclosures hitting another record high
Inventory at or near all time highs
Interest rates rising

Well, at least they stopped saying "Bottom" — after two years of getting that word wrong.


Flat Existing-Home Sales Likely Before Gradual Recovery
NAR, March 06, 2008

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What's been said:

Discussions found on the web:
  1. Lawrence Yun commented on Mar 6

    NAR = National Association of Retards

  2. Chief Tomahawk commented on Mar 6

    I wonder whether David Learah will have a 2nd edition of his “Are You Missing the Property Boom” in print anytime soon…

  3. michael schumacher commented on Mar 6

    and when we get the March numbers that reflect the second highest amount of “bad loans” resetting they will trot out the bottom argument again.

    notice how they never speak or mention qualifying guidelines……


  4. SPECTRE of Deflation commented on Mar 6

    Whatever they are smoking needs to be our number 1 export. This way the world will believe anything we say.

  5. Chief Tomahawk commented on Mar 6

    The actual listing on is even better….

    Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade – And How to Profit From Them (Hardcover)
    by David Lereah (Author) “The recent U.S. real estate boom has made money for an incredible number of households in America…”

  6. rick commented on Mar 6

    How many of the transfers are tied directly to foreclosures i.e. borrower to lender and then lender to another purchaser. See how these numbers are Really Cooked! At least 2 transactions for each foreclosure.

  7. scorpio commented on Mar 6

    here we go. my feeling has been the FRB steps in at critical junctures to manage this decline. today will be a test. this market should be > 20% lower

  8. scorpio commented on Mar 6

    and there’s Gasparino, right on time! hey charlie: if Ambac and its bankers have something to sell, let them sell it.

  9. Davis Hall commented on Mar 6

    Total mortgages outstanding in US dollar amount = 14 trillion, defualt rate of 5.82% = 900 billion, delinquent are mosty newer 300K homes with the least equity.

  10. michael schumacher commented on Mar 6

    re: Gasparino

    Yea he’s selling something alright…..

    C used him to put out a larger write-off number than they actually posted thus trying to look like it “beat”…..

    didn’t work then….not working now.

    re: Carlyle and it’s margin call….couldn’t happen to nicer bunch of douches.

    Seriously that will make it real for the top 1%….and you know what happens when they feel it…
    Socialism at it’s finest….

    What happy news or rumor will be used today?? You know it;s coming….


  11. hal commented on Mar 6

    I wonder if, with clean sales data, there is a stastical number for the minimum number of homes that would change hands due to basics such as death of seniors, job transfers, or youngsters entering the market for the first time.

    I joke about when we reach zero we have bottomed, but is the real bottom statistically at 200k units, 300k units, 100k units.

  12. LFC commented on Mar 6

    OMG! What happened to Jack Welch? Was he always a partisan hack and I just never realized it?

    Kudlow: Alright, I like your optimism very much, as always. So let me ask you, you’ve seen a lot more of Hill-Bama, as I’ve taken to calling them. Senator Clinton, Senator Obama on the campaign trail, particularly in Ohio, bashing trade, bashing businesses, bashing wealthy people, talking about income inequality. As you look at this, you’ve seen a lot of elections, you’ve been through a lot of election cycles. What’s your read here? What should people be thinking about?

    Welch: Larry, you know everyone’s talking about why the market’s tanking, the slowdown, and everything else. I think the market’s also tanking on the fact that there’s an enormous Democratic surge in voting.

  13. Vermont Trader.. commented on Mar 6

    well now that everyone has placed their bets and the path seems so obvious its time for me to sell some crude and buy some stocks. Then its off to Stowe (BR – did you know that they are owned by AIG?) for some skiing. Have a good weekend.

  14. jim bacon commented on Mar 6

    Kudlow was last seen with a rather bedraggled looking blond aka goldilocks.

  15. scorpio commented on Mar 6

    VT: buy some mortgages from Thornburg or WaMu while you’re at it, or some munis from Deshille County AL (see yday’s WSJ). they could use the help

  16. Marcus Aurelius commented on Mar 6

    Whatever they are smoking needs to be our number 1 export. This way the world will believe anything we say.

    Posted by: SPECTRE of Deflation | Mar 6, 2008 10:59:32 AM



    As long as follow the German’s line of thinking regarding beer, and keep the best stuff here. I have a feeling we’re going to need it.

  17. Marcus Aurelius commented on Mar 6

    I think the market’s also tanking on the fact that there’s an enormous Democratic surge in voting.
    Posted by: LFC | Mar 6, 2008 11:45:18 AM


    Adults! Quick! Torch the place!

  18. Dee Leverage commented on Mar 6


    I am the Prophet of Doom…My name is Dee Leverage. I first visited sub-prime markets…then munis…now alt-a. You don’t want to see me at your door. I am the 11th plague. I am the truth…the anti Dennis Kneale. And I am about to conduct a global margin call. Mark your doorpost…Passover is coming.

  19. AGG commented on Mar 6

    Back in 2000 some interesting things happened in the stock market. I do believe it’s time to look to springtime and get out the summer shorts.

  20. Mike_in_FL commented on Mar 6

    I personally think the March and April sales numbers are going to tell the real story. The latest wave of the credit crunch began hitting the mortgage market in February (and it has only gotten more powerful in March). That means March and April sales figures will likely look pretty dismal. My two cents anyway.

  21. E commented on Mar 6

    Hey Dee, I see that you’ve gone back to your maiden name after ditching Mr. Coupled.

  22. Dee Leverage commented on Mar 6

    I have a call later with a Mr. Morgan…Mr. J.P. Morgan. Those $2 trillion in derivatives will be a bitch to unwind. I may have to take him to lunch at Four Seasons.

  23. Ross commented on Mar 6

    Gotta luv ya, Dee. Sorry to hear about Mr. Couple. You gonna resume your maiden name,
    Dee Fault?

  24. Crim Jamer commented on Mar 6

    Anyone know why there are no inverse bond etfs, only inverse bond funds. Is it that hard to make an inverse bond etf?

  25. Mr. Obvious commented on Mar 6

    From the “This Ain’t Good” file:

    Federal Reserve Report Shows Homeowner Equity Dipping Below 50 Percent, Lowest on Record

    NEW YORK (AP) — Americans’ percentage of equity in their homes has fallen below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday. Homeowners’ percentage of equity slipped to a revised lower 49.6 percent in the second quarter of 2007, the central bank reported in its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent in the fourth quarter — the third straight quarter it was under 50 percent. That marks the first time homeowners’ debt on their houses exceeds their equity since the Fed started tracking the data in 1945.

    The total value of equity also fell for the third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.

    Home equity, which is equal to the percentage of a home’s market value minus mortgage-related debt, has steadily decreased even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans and lines of credit and an increase in 100 percent or more home financing.

    Economists expect this figure to drop even further as declining home prices eat into the value of most Americans’ single largest asset.

    Moody’s estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be “upside down” if prices fall 20 percent from their peak.

  26. Francois commented on Mar 6

    “Welch: Larry, you know everyone’s talking about why the market’s tanking, the slowdown, and everything else. I think the market’s also tanking on the fact that there’s an enormous Democratic surge in voting.”

    Yeah Jack! Why do you think it is so? Because, all of a sudden, Americans have collectively been seized by a terminal case of the Lemming’s Syndrome, pushing them to collective suicide?

    Or…could it be that the Republicans have shown they are not fit to govern at this point in time?

  27. Dee Leverage commented on Mar 6

    Now there are double long and double short gold funds…they did not get my memo. I have been busy today…Thornburg, Carlyle…oh and I’m planning a big trip to China for the Olympics.

  28. Ross commented on Mar 6

    Mr. Obvious,
    Excellent post. What makes this even more alarming to moi is that there is a very large percentage of homeowners who have no mortgage on their abodes. If I remember correctly it is somewhere close to 30%. That would kinda skew the stats.

    Puts to rest the theory of ‘the middle class majority.’ Is there still a middle class?

  29. Joe commented on Mar 6

    Higher loan limits will solve the all the worlds problems. In a time when everyone else is feeling the housing excesses washed out, going the opposite way will help?

  30. SPECTRE of Deflation commented on Mar 6

    Anyone who believes either political junta in this country needs their heads examined. Folks, both groups are raping and pillaging J6P to death. They have descimated the middle class while at the same time burying this country with debt that can’t possibly be repaid. These groups will not lead us out of this morass. It will once again be the working poor and what’s left of the middle class to pull the country out of this mess by it’s bootstraps. Who knows, maybe a Greater Generation will surprise us all.

  31. SPECTRE of Deflation commented on Mar 6

    MA, I agree. Long Distillers and Beer Companies may still be a grand play based on what I see coming. I read somewhere this morning that the older folks who lived through the Depression said it came on like someone had flipped a light switch. So it goes…

  32. Drewbert commented on Mar 6

    His doctor sure has access to the good stuff.

  33. Barry Tobias commented on Mar 6

    Dear Mr. BP,

    I love your blog, period.

    Just reading your post about the hallucinogenic NAR and was reminded of your saying a few issues ago that you would one day cover the topic of what signs to look for in a market bottom.

    I’m all ears.

    Thanks for all the energy and intelligence that you put into The Big Picture.

    Barry Tobias

  34. M1EK commented on Mar 6

    SoD, the last refuge of the partisan when he can no longer defend his side is to claim that both sides were the same, anyways.

    It’s a load of crap this time. The Adults Are Coming, indeed.

  35. Joe Klein’s conscience commented on Mar 6

    Welch has been a hard core partisan for a long time. Look up his comments about Tim Russert(aka Teh Big Punkinhead). If you watch either Russert or Matthews these days, you’d never believe that either of them once worked for Democrats in Congress(Matthews for Tip O’Neill and Russert for Moynihan).

  36. SPECTRE of Deflation commented on Mar 6

    MIEK, Please name either group that has threatened any legislation that shrinks government? They both know we have 60 Trillion in unfunded liabilities which can never be repaid unless you want to live like they do in a third world country. By all means rah…rah whichever, but in the end we will get what we deserve from both these groups. Each sides goal is to keep us fighting amongst ourselves while they steal us blind. So far it looks to be a continuation with voters too stupid to say no more.

  37. Dumb and Dumber commented on Mar 6

    Higher loan limits are not going to help. Interest rates for these higher loan limits are going to be .5% to 1% above todays FHA and conforming rates. Wall Street has also told the feds it will be May or June before they can create the securities to close these loans. There is no immediate help with these new limits.

  38. LFC commented on Mar 6

    Joe Klein’s Conscience: Tip O’Neill was no prize. It was him and his ilk that made me initially register Republican when I turned 18. (The last 15 years of GOP politics and performance pretty much beat that out of me.)

    SPECTRE: Clinton achieved a balanced budget by controlling spending levels. Feel free to compare Clinton’s year over year spending increases (incl. when there was a Dem Congress, so no trying to give credit to Newt), particular discretionary spending increases, to the increases foisted upon us by GW and the GOP Congress. Spoiler Alert – You won’t like what you see.

    Oh, yeah. You might want to read this Bloomberg article that looks at where we would have been if Bush and the GOP had simply followed Clinton’s proposed spending levels, rather than going on a vote buying spree with our credit card. It even allows for Afghanistan and Iraq. You won’t like this either.

  39. FINANCIALsight commented on Mar 6

    In the press release today, the NAR predicts that ”The aggregate existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase 3.5 percent to $223,800 in 2009.”

    The only problem is that prices have already declined to $201,100 (median existing homes sales price for January 2008). They are also projecting for the aggregate existing home price for all of 2008 to be at $216,300 (not just the month of December).

    Was this a simple math error? Or was it an attempt to mislead the public?

    I posted some more analysis and charts on my blog.

  40. BelowTheCrowd commented on Mar 6

    The NAR should look at the charts for real estate prices and volume for the past few decades. It usually takes 2-3 years to hit a bottom, and usually another 5 years before moving off the bottom. Typically it’s 10-12 years before somebody who bought at the peak breaks even.


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