Media Gets Pending Home Sales Wrong (Again!)

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.

Pending Home Sales Index


That’s not my definition, that comes straight from the NAR’s release. Its the annual changes that matters more.

Not that you would know that reading the spinmeister-in-Chief at the NAR. In what I can only surmise is a foolish attempt at reputation destruction,  Lawrence Yun seems to always emphasize the wrong data. We are left with the assumption that he takes fast track career advice from David Lereah.

Here are the facts: The Pending Home Sales Index is down 12.3% from June 2007 too June 2008. According the the NAR’s statement about the PHSI, that is a negative for the next two months. While their press release emphasizes the 5.3% monthly gain in June, we have demonstrated in the past why that amount to little more than the usual seasonality, as families who are moving try to get into the new homes before the new school year starts.

Its one thing for the NAR flacks to spin it, its especially disappointing when the media gets it wrong.


In a sign that the U.S. housing market may strengthen in coming months,
an index of sales contracts on previously owned U.S. homes rose 5.3% in
June from the prior month, the National Association of Realtors
reported Thursday.

No, no, no, no, no!

Doesn’t anyone else read the footnotes or methodologies ?

UPDATE: August 7, 2008 12:45pm

Mr. Mortgage says its even worse than that:

"Many of the ‘pendings’ are short sales, which will never get approved. As a
matter of fact, a study just came out of Santa Clara county, CA showing that
between Sept 2007 and the end of March 2008, 2700 short sales were applied for
and 77 approved.

How many of today’s ‘pendings’ will never close because the
short sale approval does not go through?"

UPDATE2: August 7, 2008 2:41pm

Diana Olick points to this chart (below) from, showing the difference between PHSI and actual closings. This very much supports the annual contention discussed above.



Revisiting Housing Seasonality & the Perennial Bottom Callers  (July 2008)

Pending Home Sales Rise, Wider Gains Anticipated as Buyers tap Housing Provisions
NAR, August 07, 2008

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What's been said:

Discussions found on the web:
  1. Jeff commented on Aug 7

    This is why we visit your blog (and others), Barry. The MSM long ago lost any shred of credibility they had left.

    They’re too busy with the bluster and clown suits to “entertain us” to offer up any in-depth analysis about anything.

    Thank God for the Internet.

  2. Jeff commented on Aug 7

    The following is an email I received from a local real estate agent here in Minneapolis after I inquired about some condos that are in foreclosure (awesome location too, right next to Lake Calhoun in the city). I just started to fish around here to see if I can land any deals at truly cut rate prices (and for my own information regarding my the markets and my investment portfolio). I was surprised by his honesty but not by anything else in the email. There are several condo projects that are in this horrible state right now (which was easily predictable a few years ago by anyone with any common sense, but I digress) here in the Twin Cities. Take a look:

    The developer did go into foreclosure. About 40% of the units are privately owned and occupied. The bank that repossessed the developer’s inventory has not released the remaining units on the market and faces some challenges as most are unfinished shells. It sort of puts the entire building into a state of uncertainty. Without 60% of the monthly associations being paid, I fear that expenses will increase dramatically for those that need the lights on and the water running. Then as the bank works through its inventory and sells it for assumedly much less than they were previously selling for it may really turn the values upside down. It’s a tough time for the building and many other buildings are faced with similar challenges. It makes for a pretty sticky situation and could be more expense and drama then it’s worth. I don’t mean to totally scare you but there certainly may be unforeseen issues and I just want to be upfront about it.

  3. Geoff commented on Aug 7

    Absurd. Pending sales tells me nothing. To emphasize pending sales, and sequential months no less, is quite misleading. It’s sales that closed that counts — that means people actually had the financing and purchased the house. You would think that at this point of the housing deflation cycle, reporters would be able to extract the relevant statistics, not the headlines per an agenda-driven group. Oh well, reason #517,664 why you can soon start shorting credit again.

  4. rww commented on Aug 7

    BR, I don’t share your frustration:

    Why should the financial press be any smarter than the political press? Why should anything be different today than it ever was? It is the way of the world and it will ever be. War, fascism, zealotry in all its forms. I don’t believe it is rational to expect rationality in any large social endeavor.

  5. AJF commented on Aug 7

    I wish Bloomberg and CNBC would have you on to discuss the pabulum that is spewed out from the NAR. It is my understanding that when a bank owned home is sold, this is included in the NAR numbers. Are the homes that are taken back or repoed by the bank included in these numbers as well- I am referring to the initial foreclosure process of taking the home away from the owner/idiot investor? I ask because I beleive I read or heard that the Realtors were including “takebacks” in their numbers . . . by the way, I do know that they include multiple sales to non-end users in their numbers- for instance when one developer sells a division of empty homes to another party, who then will ultimately list these units for sale. How do they get away with the double counting?

  6. VennData commented on Aug 7

    Seasonally adjusting Da Bears 2007/2008 got them into the Super Bowl for a second consecutive year and this time, thanks to the month-on-month scoring difference, they even won it.

    Congratulations Chicago (Can Yun get me tickets? I can’t wait to drink the kool aid in the NAR box.)

  7. Mr Right Now commented on Aug 7

    Thanks for the terrific analysis, you’re one smart cookie

  8. Jerome from Paris commented on Aug 7

    In French medias same bias (or even worse): seems that most of the journalists are unable to do proper statistic analysis… they are wrong in the real meaning of numbers most of the time!

  9. JustinTheSkeptic commented on Aug 7

    Load up on your shorts, before the shit hits the fan! They can only suppress the diarrhea for so long…

  10. Scott commented on Aug 7

    Oh hell, the cheerleaders of all things bullish at CNBC and elsewhere don’t give a rat’s ass about real numbers or real anything. They just want to talk happy talk. I’d like to see Cuomo drop an indictment bomb on CNBC, etc. for fraud. And yeah I know CNBC is in Jersey, but I’m making a general point and don’t feel like googling the Jersey A.G. ^^ On the upside, the market still finds it’s level over time. Downside is anyone that listens to the retards on TV gets whacked in the meantime…

  11. Jeff commented on Aug 7

    Dennis Kneale on CNBC just about calling the bottom in housing. Good grief. Someday he’ll be right and he’ll try to assert that he was right all along. Why I even bother with this “news channel” on in the background while I work is beyond me. Perhaps I’m a glutton for punishment.

  12. Jim D commented on Aug 7

    Jeff –

    For goodness sake, make that agent your agent for life. It’s rare enough to get one that honest, but throw in competence, and that’s a rare find indeed.

  13. Jeff commented on Aug 7

    Jim D:

    Actually, I’m meeting with that vert agent this Saturday morning. If all goes well, I do indeed plan to work with him at some point. What’s interesting is that his honesty (what a novel concept in this day and age of say/do anything for a nickel!) may have just won my business once I’m ready to buy (which is probably not yet).

  14. bluestatedon commented on Aug 7

    “Doesn’t anyone else read the footnotes or methodologies?”

    What’s a footnote? Is that the label inside your shoe? And “methodology” sounds kinda French to me, and sorta communist too, come to think of it. Thank god the press doesn’t bother us with that useless foreign crap.

  15. Mark commented on Aug 7

    Paulson wants to short “the strong dollar” so he needs all the help he can get

  16. me commented on Aug 7

    It seems pending sales and actual sales don’t have much in common, or should I say correlation.
    Chech this CNBC chart:

  17. jake commented on Aug 7

    Well, you are right that the year-on-year numbers are the right ones, it is not as bad as you make it out (although much worse than the cheerleaders at CNBC make it out to be). The y-o-y numbers are going down at a slower pace. The y-o-y numbers were at -22% in Feb and are now at -12%. While the first derivative is still negative, the second derivative has become positive.

    This is the case with most of the housing numbers out there. Things are getting worse, but no longer getting worse at an increasing rate. This is actually a positive as when forecasting numbers with a negative second derivative the series approaches zero very quickly.

  18. bob bitchtits commented on Aug 7

    i dont see why yall expect anything different

    the truth will scare the cattle and we sure dont want to get caught in that stampede


  19. Frank commented on Aug 7

    Barry, Barry, Barry, Barry, Barry…just go with the flow. So much of this housing game is psychology…if people believe housing prices are bottoming, they will in fact bottom. Just relax…it’ll be OK ;-)

  20. Stuart commented on Aug 7

    I swear, Baghdad Bob is our media czar. Like my earlier comments about John Thain, i can see one or two misses or gaffs as just sloppy or lazy headline writing, but not such a consecutive, consistent pattern of rosy colored glass spin that isn’t even factually correct. This is long past outrageous, it’s PRAVDA like. What the hell is going on in this land. A Managerial aristocracy/financial oligarchy with a PR arm (MSM). I know that sound tinfoil but it sure as hell fits as well as anything else to what’s gone on in every market in all its reporting and gyrations over the past year. Marketwatch coming out with such a clearly off-based spun headline…. no, I don’t believe they failed to read the fine print, it just didn’t fit into their story they had intent to put out right from the get go. Unfortunately, IMO 90% of the public gets their info from these kind of MSM outlets, 10% from insightful blogs that critique and challenge one to think. We’re phucked.

  21. BobC commented on Aug 7

    What is really sobering is that the markets react so much to this “data”. Presumably, the movers and shakers know the REAL data. So what drives the apparently irrational moves in the markets? And when the fundamentals finally exert themselves, will it be sudden and catastrophic?

  22. john commented on Aug 7

    when you say 2700 were applied for and 77 were approved… you do realize that the time frame that those dataBits are from are just as the market was realizing what was going on, right? and that the landscape of that might be very different from the end of that time period to today, right?

    so particular with the footnotes of the other theory, recognize when you’re putting catsup on your own dogs!


  23. The Big Picture commented on Aug 8

    Who Doesn’t Understand the Pending Home Sales Index?

    Only two groups: The Media and Wall Street economists. I’ll make this as simple as possible. (If you are a journalist that covers this area, please read and UNDERSTAND this). The NAR release makes clear (in the footnotes) that the Pending Home Sales In…

  24. M commented on Aug 9


    We just had two back to back 300+ point rallies including today. Still feeling bearish? Much as agree with you bears are being carried out…..

  25. Barry commented on Aug 10

    As noted on July 14th, we covered our shorts and turned made a tactical bullish trade.

    Nearly all of our shorts were covered, except notably AIG.

    I also noted we were looking for Oil to pull back to $105-110

    And, I wrote last week this could run to 12,500

    But this is tactical move, and does not suggest the ultimate lows have been put in.

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