Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for July 2007 showing a truly stark and horrendous continuation of the historic decline to residential housing on a month-to-month and year-over-year basis, both nationally and in every region.
There is simply no doubt that these forward looking results are predicting a substantial new leg down to demand and inevitably prices.
Additionally, the Northeast, Midwest, West and the National regions have now fallen WELL BELOW 100 indicating that, seasonally adjusted, July’s home sales activity was below the average activity recorded in 2001, the first year Pending Home Sales were tracked.
As usual, NARs Chief Economist, Laurence Yun takes another crack at false optimism pointing the finger at Jumbo loans and insinuating that drop-off in demand is temporary.
“These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.
“If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,”
The following chart shows the national Pending Homes Sales Index since 2005 compared monthly. Notice that each year, the months value is decreasing consistently (click for larger version).
The following chart shows the year-over-year changes to the national Pending Home Sales index as well as comparing the latest results against the values seen in the peak year of 2005 (click for larger version).
The following chart shows the pending home sales index nationally and for each region tracked (click for larger version).
Note that in the above charts, I had to use the Not Seasonally Adjusted (NSA) data series as NAR changed the methodology for their Seasonally Adjusted (SA) series a while back and never republished the numbers. This is why none of the data appears to be breaking below a value of 100 because it’s the SA series that is now below 100.Keep in mind the current pending sales decline comes ON TOP of last years historic fall-off so the continued weakness is a sure sign that the decline is not ephemeral.
Look at the July seasonally adjusted pending home sales results and draw your own conclusion:
- Nationally the index was down 16.1% as compared to July 2006.
- The Northeast region was down 10.0% as compared to July 2006.
- The West region was down 21.8% as compared to July 2006.
- The Midwest region was down 15.8% as compared to July 2006.
- The South region was down 15.2% as compared to July 2006.
