Monday, December 04, 2006

Unstable Stabilization

Today, the National Association of Realtors released its October “Pending Home Sales” report which showed that nationally, pending home sales had declined -1.7% as compared to September and dropped 13.2% as compared to October 2005.

The National Association of Realtors developed the “Pending Home Sales” index as a leading indicator based on a random sampling of roughly 20% of the month’s transactions for exiting home sales and indexed to the average level of contract activity set during 2001.

In typical fashion, David Lereah, Chief Economist of the National Association of Realtors attempted to spin the data to a more positive outlook while presenting yet another version of the now fatigued “market is stabilizing” analysis.

“It’s important to focus on where the housing market is now – it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high – they’ll stay that way through 2007,”

As usual, looking more closely at the results one might draw a less optimistic conclusion:

  • Nationally the index was down 13.2% as compared to October 2005

  • The Northeast region was down 13.5% as compared to October 2005.

    • Additionally, October marks the fifth consecutive month that this region has registered activity BELOW the average activity recorded in 2001, the first year Pending Home Sales were tracked.

  • The West region was down 17.4% as compared to October 2005.

  • The Midwest region was down 15.4% as compared to October 2005.

    • Additionally, October marks the fourth consecutive month that this region has registered activity BELOW the average activity recorded in 2001, the first year Pending Home Sales were tracked.

  • The South region was down 9.4% as compared to October 2005.
So it appears that, year-over-year, contract activity is dropping rather sharply with the All regions now showing significant declines.


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