Pending Home Sales Index falls 21.4%

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
Ben Rooney  April 8, 2008: 11:00 AM EDT

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What's been said:

Discussions found on the web:
  1. steeliekid commented on Apr 8

    Nice Howard Stern reference!! I actually reread the headline using his (CHB’s) voice – good stuff. Please find a way to work in “Hank the Angry (drunken) Dwarf” in next!

  2. mr reality commented on Apr 8

    we need to get past this political correctness BS….these people misrepresent the data to their advantage… me that is called lying. these people arent stupid or mis-informed………..

  3. bluestatedon commented on Apr 8

    C’mon, don’t be so hard on Lawrence. After all, the decline was unexpected, according to

    “Pending sales of previously owned homes fell a bigger-than-expected 1.9 percent in February to the lowest level on record, according to a report from a real estate trade group…”

  4. NOR commented on Apr 8

    Drug abuser eh? – dont think so..

    Corrupted and biased as the rest of the bunch? – yes

  5. RV Kennedy commented on Apr 8

    I think you misunderstand the NAR’s headline, it’s not a prediction, it’s a COMMAND. That’s why it’s called realty. Their very words make it real.

  6. john commented on Apr 8

    The panic quellers should speak to the forclosure dwellers.

  7. VennData commented on Apr 8

    I disagree with you all. Remember back in the first years of these decade after a spurt in home sales, prices, starts that the NAR would often predict that the remainder of the year will be terrible?

    Oh, you mean they didn’t?

  8. Ross commented on Apr 8

    Heads up

    Greenspan is to be interviewed on CNBC today at 4 eastern.

    I’ll tune in for some major chuckles.

  9. J.Bridges commented on Apr 8

    Big Yun, pig Yun, ha ha charade you are…

    Whatever sort of pig this guy is, it’s safe to say he’s feeding out of the same trough as all the other dissembling animals purporting to see a recovery on the horizon. Rubbish.

    If he leaves NAR, perhaps he and Dennis Kneale will start their own consultancy: Swine Analytics.

  10. Steve Barry commented on Apr 8

    Greenspan is going from “Maestro” to “History’s Greatest Monster” (eclipsing Jimmy Carter all you Simpson’s fans) faster than Bill Miller went from “Legendary Investment Manager” to “Complete Laughingstock”.

  11. mitch commented on Apr 8

    Lets bring up more Princess Bride quotes.

    Have you ever heard of Plato, Aristotle, Socrates, NAR? Morons!

  12. Bob A commented on Apr 8

    “Pathological Optimism” aka “Goldilocksism”

    Seattle area pending stats back to 2000 in the chart at the end of this article.
    Note the current numbers are the lowest since and well below 2000.

  13. emailcraigs commented on Apr 8

    I think its obvious that there is a concerted effort in the recent rhetoric to present a picture of stability and recovery in the housing market and the financial sector as a whole. This is much the same type of rhetoric that we saw coming from the white-house before the official recession and post home equity meltdown. This type of agenda works on probably 85%, if not more, of the American public because they really have no idea what recent events mean for the immediate future let alone for the next few years. Everything has become spin….heck, we are now spinning off of spin. Reality is still a playground it seems.

  14. Joe Klein’s conscience commented on Apr 8

    Did they say who was doing the interview? Erin Burnett? The Money Honey? It would be too funny if it were Kudlow.

  15. craig commented on Apr 8

    J. Bridges:

    great Floyd reference, loved it.

    The industry talking heads are as believable as Baghdad Bob.

    I love the phrasing of the sentence “the era of deep sales declines appears to be over”.

    The vague phrasing has to be designed to lead the reader to falsely draw a positive conclusion.

    It’s like a doctor standing over a dead body and saying “his condition won’t worsen”…and people get excited and draw positive conclusions about the patient living.

    hey….technically the doc’s statement is accurate but it doesn’t change the fact the patient is dead.

    and no, i’m not saying real estate is dead and we’re about to fall into an economic abyss or crumble as a nation. I’m just saying the statement of the real estate industry is laughable.

  16. Pool Shark commented on Apr 8

    Bob A:

    That is an amazing article. Typical J6P will see that article, read the headline, and assume home sales in the Seattle area are picking up.

    As you point out, those who read to the end, and actually decipher the chart at the bottom will discover that Seattle area home sales for each month since November ’07 are at their lowest since 2000.

    Articles like that one give ‘spin’ a bad name.

  17. J.Bridges commented on Apr 8


    Cheers for noticing the Floyd reference– that album, somehow, seems especially relevant these days:)

    “and no, i’m not saying real estate is dead and we’re about to fall into an economic abyss or crumble as a nation. I’m just saying the statement of the real estate industry is laughable.”

    Quite right. Though, I’ll have to say if given the odds of economic abyss or Dow 16,000, you can guess which one I’ll take. Have a good week, C.

  18. mitch commented on Apr 8

    BR, a good exercise is calling the countrywide mortgage broker and talking for a few minutes, which I just did. No market for jumbos, LTV clearly not improving, credit scores are dropping, incomes are flat/down. He estimated 2-5 years before we’re at bottom. But then again, the market is forward looking. Hope springs eternal…

  19. Pat G. commented on Apr 8

    Gee, I better get right out there before its too late and find me a house to buy!!

  20. mw commented on Apr 8

    Maybe we should be “loading up” on the homebuilders and financials like some pundits are calling calling for..(NO WAY MAN!) I wanted to throw a brick through my tv screen when I heard Vince Farrell say he liked financials like AIG, saying after their huge 4Q writedown because of.. GET THIS… “STUPID” ACCOUNTING RULES!! We have learned NOTHING from ENRON.

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