The mainstream financial media is widely misreporting the NAR’s Pending Home Sales data this morning, simply parroting the NAR’s seasonally manipulated data. As it turns out, the NAR is screwing its own pooch because the actual, not manipulated data is actually much better than the seasonally smoothed numbers imply. That’s not to say sales are great. They remain 25% below the peak levels reached during the bubble, but the fact is that sales were up in August, and not just by a little. They were up by 9.4% month to month, and were 13.1% above the level of last August. That’s the strongest August gain since at least 2001.
It is clear that the collapse in prices is beginning to at least bring some buyers back into the market. While a high percentage of contracts are still falling through, this increase in demand over last year’s levels is not a one month wonder. It has now persisted for 4 months. It is not yet up to 2009 levels when the market was falsely stimulated by government tax breaks to buyers, but it is 3.4% above 2008 levels.
Another key metric is the inventory to contracts ratio. That fell to 6.96 in August from 7.77 in July. It is down from 9.06 last August. This is the lowest this ratio has been since August of 2006, at 6.40 as the bubble was peaking.
All of this data fits my thesis that the housing market has stopped getting worse. Is it bottoming, or is it the calm before the next storm? I think the former, but it could be a very long time before a sustained recovery in home prices takes hold. That will depend largely on employment growth.
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