Seriously though, this is an interesting thought/point. Are pending sales really the leading indicator they should be right now? Esp considering that many (almost half) of current sales are auctions and foreclosures and short sales with banks, and that financing is tough these days, maybe pending sales aren't so definitive or telling.
June 3 -- The Mortgage Bankers Association index of mortgage applications and refinancings dropped 16.2% in the last week of May. This is the result of rising mortgage rates plain and simple. Rising rates is the result of the US currency being called into question, being diluted by the inflationary measures to raise funds to fund the stimulus and bailouts, and/or the belief that the market is rallying and people leaving long-term treasuries to go back into stocks. The MAGIC NUMBER of mortgage rates is 5%. Its an industry consensus that if rates are at 5% or higher, applications and refinancings suffer and decrease dramatically. Chase bank rates where i live are currently at 5.5%.
June 2 -- Pending sales rose 6.7% in April from March. Very strong bullish news. More importantly in my opinion is that April 2009 was 3.2% above the 2008 level. I like the year-over-year comparisons that take away some of the seasonal/cyclical influences that month-to-month comparisons miss. That being said, and knowing that "pending sales" are just that - pending - which closing and getting financing today can be tough. But its getting easier, relatively speaking. And I think the $8,000 tax credit is helping. So, this is positive news - legit positive news. I can't imagine what the bulls will do with this today.
May 28 -- New home sales came in marginally below expectation for April at 352,000 homes sold when economic consensus was expecting 360,000. The average sales price fell 14.9% year over year. All this indicating that a housing recovery will (again and again and again we repeat) be slow and long and less than dynamic, as people are still losing their jobs, economy remains weak/even negative, and supply overwhelms demand (due to continued building but also largely due to foreclosures).
May 27 -- existing home sales rose by 2.9% in April. This is good news but was in line with expectations. The bad news was taht existing homes for sale continued to rise (this month by 8.8%!), meaning that extra supply will continue to flood the market and pose an obstacle to bottoming in home price declines. The average home price fell 15.4% year-over-year.
May 26 -- Its very possible that housing may not be bottoming out currently. Or even if it is, that it isn't going to resume any upward home value action anytime soon. Mark Zandi, chief economist at Moody's Economy.com posits that we may be in the 3rd way of foreclosures (which are depressing the sales of existing and new homes by creating an oversupply of homes that swallows the insufficient demand/buyers market). Foreclosures prevent existing homes inventory from going down which continues to make prices fall. Indeed, year-over-year comparison showed that single-family homes (often quoted as the most stable of homes) fell in value 18.7 percent in March.
The first wave was when speculators gave up their quick money properties due to the start of plunging real estate values. The second wave was sub-prime mortgages and variable interest rates that suffocated borrowers (not matter how irresponsible or not). The 3rd wave (and maybe most scary) is that the average Joe is starting to lose his job and not be able to pay his bills, including his mortgage. New York Times analysts note that from November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home... increased more than 473,000. These loans total $224 billion. Thats money the banks counted on. During that SAME PERIOD, subprime mortgages in those categories increased by LESS THAN 14,000. That means the current pressure on declining home prices is coming from Average Joes not able to pay for their home mortgages? that implication/thought is scary. More than that, consider that more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.
Numbers can be confusing an manipulated but the idea remains - housing isn't done. It hasn't stabilized yet. And there are new threats on the horizon that indicate that it might not be done in the near term.
May 19 -- Housing starts fell much more than expected and are down 12.8%. The year-over-year comparison shows that April was down 54% compared to housing starts in April 2008. The April 2009 number represents an annual rate of 458,000 houses starting to be built per year. This is less than the expected rate of 520,000. What's this mean? Well, perhaps housing hasn't bottomed as much as people think. If it had, then sales of existing and new homes in general would increase and there would be demand to start INCREASING new housing starts. What's happening INSTEAD, although still for the ultimate good i think, is that there isn't enough demand to take care of the current supply of existing and new homes. PLUS don't forget that as more homes are foreclosed, that existing supply continues to rise...so its not just a matter of waiting and letting demand decrease the supply of homes available over time. That being said, I think that decreasing housing starts and letting sales make a run at decreasing the overall supply is the best route (foreclosed homes may add to supply but adding even more housing starts on top of those seems improper to me). So while this news damped the market this morning and erased serious premarket gains of 90 Dow points based on news that banks are returning TARP money, i do think its an overall positive. Short term pain = long term gain.
What may be MORE interesting is that building permits (the forward looking indicator of housing starts) also dropped more than expected = they dropped 3.3% and are at the lowest levels since record-keeping on this subject started in 1960! Not a good sign for short term housing markets going forward, but again - a good sign for the overall housing market and glut of supply of homes.
May 13 -- US foreclosures rose 32% in April compared to a year ago according to RealtyTrac. 1 in every 375 US households received at least 1 foreclosure-related notice in April.
May 4 -- A 3.2% increase in contracts signed for pending home sales was reported from February 2009 to March 2009. But is that really a fair comparison?? Month on month isn't quite right for real estate comparisons given that there are cyclical natures to the real estate market. Typically November through February are lower and sales begin to gain strength in March through July (when the weather is better and families are more willing to move... no one wants to uproot their kid from one school to another in the middle of winter afterall!). So the month to month comparison here is misleading. Better is the year over year comparison which is at 1%. A gain, but a far cry from the hoopla the 3.2% number got.
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