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Home Sales Contracts Better than Media, NAR report

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.
Inventory to Pending Home Sales Contracts Ratio Chart- Click to enlarge
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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3 Comments

  1. Grand Poopercycle

    Wouldn’t the past four months have the benefit of typical summer seasonal
    strength helping to push prices up?
    And would the signs in the macroeconomy-looking more and more like we’re
    heading into the second downcycle of the New Depression-tend to support further price deterioration over the next several months(at least)? Employment gives all indications of continuing to suck mule ass.

  2. Lee Adler

    I think the stats I cited in the article address the question about month to month and year to year volume comparisons, although as others have pointed out, last year was depressed by the ending of the government scam prop job. The other questions I have addressed in the Wall Street Examiner Professional Edition Housing update although the conclusion of the article alludes to the answers.

  3. Grand Poopercycle

    Lee, i simply think that housing can’t bottom until a) employment starts a sustained organic recovery and 2) the debt morass generally, and mortgage debt especially, is cleared up by, preferably, a form of jubilee, or some combination of time, defaults, subsidy, can-kicking, etc. Even the second, never mind the first, seems to be not in the near future.
    And when housing does bottom, the history of asset prices post-bubbles suggests housing prices will then just flatline for a decade or more; i.e., if the median existing home prices stops falling at $100K in 2015, then that median will likely be $100K-maybe $102K-in 2025. Like CSCO, MSFT, AMAT,INTC, etc., are now 11 years after the bubble burst.

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