Pending Home Sales Didn’t Really Miss

The news media reported yesterday that the NAR’s Pending Home Sales Index for December was a huge miss, falling far short of economists’ consensus expectations. This was based on the seasonally adjusted data, which is frequently misleading because the statistical manipulation often obscures the real trend. I reviewed the actual, not seasonally adjusted data. It was at the low end of the growth trend of the past 2 years, but still up 4.9% year to year. The month to month drop was slightly greater than normal for December, but is was not a significant deviation from the trend. Therefore, calling it a “huge miss” was misleading.

Some observers attributed the lower than expected number to sharply lower inventories of properties for sale.  That may have been a  factor contributing to suppressing sales. Inventories were down 170,000 units or 21.6% between December 2011 and December 2012. They were down 1.7 million units or 48% since December 2007. The December inventory to sales ratio of 6.8 is the lowest for December in the data going back to 2005 at the peak of the bubble. So the excuse about low inventories being the cause of slower sales growth may have some validity. But in the big picture, sales continue on a trend of slow but steady increases since the 2008 bottom. This year’s gain is consistent with the increase in sales contracts of 22% since December 2007, which was the low for contract volume during the crash.

Existing and Pending Home Sales - Click to Enlarge

Existing and Pending Home Sales – Click to Enlarge


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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

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