I see that the NAR has hired Crackhead Bob as their new headline writer, to wit: Existing-Home
Sales to Stablize Before Upturn in Second Half of 2008.
In a moment, we will discuss how the NAR managed to get their forecast exactly backwards. Meanwhile, let’s look at the actual index:
"The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, slipped 1.9 percent to 84.6 from an upwardly revised reading of 86.2 in January, and was 21.4 percent lower than the February 2007 index of 107.6. “The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” Yun said.
This is the lowest level reported since the index began in
2001. I’m not sure if they are being clueless or willfully deceptive.
As a reminder, here is the NAR methodology disclosure:
"The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. 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." (emphasis added)
Again, you have to be a drug abuser to believe a 21.4% drop in the year-over-year index is a sign of stability.
Now, back to the NAR forecast of "Stability" in the first half and improvement in the second half. Have a look at the chart below. As we discussed last month, home buying is extremely seasonal; that’s why month to month changes are all but meaningless.
The first 6 months of the year all show gradual improvements; July and August represent a plateau of sorts, with the sales dropping for the last four months of the year. My best guess as to why this is: Most families want to move into their new home before the new school year starts, so as to minimize disruption for the kids.
Here’s a look at the Composite Monthly Sales (NSA) for the past 4 years:
Note that this data is not seasonally adjusted.
Existing Home Sales, Non Seasonally Adjusted, Explained
Existing-Home Sales to Stablize Before Upturn in Second Half of 2008
National Association of Realtors, April 08, 2008
Pending home sales at all-time low
CNNMoney.com April 8, 2008: 11:00 AM EDT