Pending Home Sales Index Falls 14.6% below May 2007

Americans signed less contracts to purchase previously
owned homes in May for the third month in four, falling 4.7%. This was considerably less than the 2.8% decline that expected.  The drop puts the prior month’s unexplained increase into question.

All 4 regions of the country saw declines.

The annual decline (Non Seasonally Adjusted) was 14.6%. Note that this number is the measure of contract signings, and is thus a precursor to future existing home sales.

For some bizarre reason, the NAR expects Existing-home sales to grow from an annual pace of 5.01 million in the second quarter to 5.75 million in the fourth quarter. Considering Q2 is much more active than Q4 for home purchases, this forecast borders on the psychotic.

Also suspect: The NAR expects a 5.0% increase in existing home sales next year to 5.58 million.

As we have noted many times in the past, the year-over-year Pending Home Sales Index data is what matters, not the monthly
. From the NAR website:

"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

While a loss of 4.7% (seasonally adjusted) monthly number is a negative, the 14.6% drop in the index from last
year is forecasting further housing weakness.

(I’ll see if I can scratch up a chart from somewhere)


Home Sales to Vary in Narrow Range, Then Rise in Second Half
WASHINGTON, July 08, 2008

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What's been said:

Discussions found on the web:
  1. Stuart commented on Jul 8

    NAR is a discredited ship of fools. Somewhere down in its bowels Baghdad Bob must be at the helm. Someday when they post these remarks, someone on the MSM will put them to task and have them precisely spell out their thinking for such counter-common sense forecasts as this. God, I hope that gets recorded when it happens. The Comedy Channel would love to air it.

  2. crack commented on Jul 8

    Two successive months which miss to either side of expectations could indicate one of the months got a boost at the expense of the other. I suspect this is what happened here. This wouldn’t be good news but it would explain the differences and not indicate a deviation from the trend.

    It could however mean that all the buying has been done.

  3. leftback commented on Jul 8

    Anyone ever seen Lawrence Yun and Pinocchio in the same place at the same time?

  4. BillB commented on Jul 8

    To be fair, the prior month was adjusted upwards so the percent decline wasn’t quite as bad. If I did my math right, they originally had April 88.2 and May (projected) 85.8. Now: April 88.9 and May 84.7. But note these are seasonally adjusted, and “pending” sales, so there’s so many variables you can’t get too worked up about variance month to month. I know we all enjoy being bearish about the housing market here but really, the NAR numbers show it leveling off since last August, not free-falling. Not to say things won’t dip down again if we go deeper into a recession.

  5. Rockitz commented on Jul 8

    Possibly they are accounting for a dollar collapse and the associated pop from the influx of foreign buyers?

  6. Darin commented on Jul 9

    Chuck Butler of The Daily Pfenning @ is reporting today that the Existing Home Sales numbers have included foreclosures as long as they were occupied at the time of foreclosure! This really makes the numbers stink! Here’s the quote/link:
    “Before I go on to other things, there’s something that’s been on my mind for a month now, and I just remembered what it was! Recall when the Existing Home Sales data was strong a month ago, and I said that it must have been the fall in home prices to spur that kind of result? Well… As I thought more about it, I decided to look into a thought I had… The thought was a question… Are foreclosures included in Existing Home Sales data? And, lo and behold, the answer is yes! As long as someone was living in the house when it was foreclosed, which would put the percentage very high, wouldn’t you think? Anyway… There you have it! A price drop and foreclosures spurred that strong Existing Home Sales report… I knew there was something rotten in Denmark when that data printed!”

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