March Pending Home Sales: Lots Of Hype But Little Hope

Despite continued price gains, most other housing statistics are weak. Sales of both new and existing homes are flat to down. The recovery in housing starts, now less than one million units at annual rates, is faltering. Moreover, home prices nationally have not made it back to 2005.  – David Blizter, Chairman of the Index Committee at S&P (from today’s Case Shiller home price index report).

Yesterday the National Association of Realtors released its Pending Home Sales Index for March.  It showed an uptick from February – but then again it should given the seasonal factors involved.  It showed an 8% drop from March 2013 and a 12% plunge from its peak in June 2013.

I wrote an article analyzing the devil in the detail.  You can read it here:   March Pending Home Sales.

I wanted to briefly touch upon the issue of price.  I saw a comment in another article yesterday that asserted that “rising prices” were the only thing protecting the market from collapsing.   Rising prices are actually bearish, because they make homes unaffordable for the first-time buyer, which historically makes up 40% of all home sales.

However, the price reports you see released, like today’s Case Shiller price report, are cited on a year over year comparison basis.  But prices of new and existing homes peaked and have been in decline since last summer.   In fact, while today’s Case Shiller report showed a year/year gain, there were price declines from January to February in 13 of the 20 cities that used in the C-S index:  LINK.  This is highly significant because the Case Shiller methodology overweights the price-effect from flippers.   A flipper buys a home for $200k, spends $25k renovating it and flips it for $250k.   That shows up as a 25% price gain.

 

8 thoughts on “March Pending Home Sales: Lots Of Hype But Little Hope

  1. Walmart is cutting hours on their part-time employees here in Reno, NV. I know people who work at the one I live close to and they said the annoucement came several days ago. Sales apparnetly are slowing so then low-wage workers get their pay cut. Then lesser sales starts happening become those same workers can’t afford anything and more pay cuts happens till you hit dead bottom. Eventually, people are going to be living on the streets and rioting/looting.

  2. You were right calling it a housing bust when almost every other so called expert claimed “housing always goes up” and boom times would last forever.

    Fog a mirror loans, NINJA loans, house flipping, every trick in the book to sell houses were used in the housing run up. It wouldn’t surprise me if some of the dirty tricks used in the housing Ponzi scheme made the snake oil salesmen on wall Street blush (or think to themselves ‘why didn’t I think of that?’)

    No jobs, no housing recovery, it can’t get simpler than that, though it is too complicated for the N A R or the FED to figure out.

  3. Dave your articles and interviews are full of unique insights on markets as always. It’s amazing how much the real estate market and it’s public image become ever more shadowy and detached from the real world of Main Street while more susceptible to fraud and distortions.
    Now, the gold and silver programmers aim to artificially resuscitate their dying mothership with blunt instruments from the Dark Ages:
    CME Group Considering Gold, Silver Futures Daily-Trading Limits
    http://www.bloomberg.com/news/2014-04-29/cme-group-considering-gold-silver-futures-daily-trading-limits.html
    Desperate strokes for desperate folks, or simple going through the motions, paying lip service to “self-regulation”?

    1. I’m wondering if they are putting the curbs in to help cap the big upside moves we know are coming sooner or later.

    1. Thanks. I figured I might have missed one day out of a data series from 1989 to present. lol. I think I mentioned the one day negative GOFO in 2001 in my Seeking Alpha article

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