Some Hope in Pending Home Sales Data?
US News and World Report -- After months and months of painful data, economists said there is a sliver of sunshine in a housing report released today.The National Association of Realtors announced that June pending homes sales increased a stronger-than-expected 5.3% from the previous month, although sales remain more than 12% lower than year-ago levels (see chart above).
Economists had been expecting the report to show a 1% drop. "While this indicator is volatile and affected to an unknown degree by foreclosures, it does suggest that conditions in the resale market for real estate may be stabilizing," economists at Goldman Sachs said in a report.
6 Comments:
Well, perhaps, the
fat lady hasn't sung yet.
Hope? Hah. Maybe you should look into the data some more.
THe pollyannas have no mental model for what's happening for they look for scraps of information that appear optimistic. We're in a credit bust plain and simple. If you don't understand how credit busts play out then go read some of Von Mises' writings. You're a free market economist right? You should know this stuff.
I was also expecting a decline in pending sales. Mortgage rates in June rose in June (6% to 6.3%), and mortgage applications fell on a four-week moving average -3.8%. Perhaps more purchase and sale agreements (pending home sales) were signed in June than in May, but that does not imply that existing home sales will be equally strong in June. People will sign the P&S's and then see that mortgage rates have risen, and back out of the deal.
In the end, the pending home sales number, however numerically positive it is, does not indicate a decided stabilization in the housing market.
Seasonality. School starts soon.
Data are seasonally adjusted.
Dr. Perry:
Take a look at the endnotes of the release from the NAR. "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."
Therefore, the index is actually down 12.3% y/y. Short sales and REOs make up about 40% of the sales. No sign of a bottom yet.
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