Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for January 2008 showing accelerating weakness to existing home sales activity and a clear continuation of the historic decline to residential housing on a year-over-year basis, both nationally and in every region.As the decline in demand for residential housing enters its third year, it’s important to consider the significance of both the extent of the decline and the severity of the oncoming declines to existing home sales activity clearly indicated by the current 20% year-over-year drop-off in pending home sales.
It is very likely that we are now seeing the spiraling feedback effect of sharply declining prices and the palpable sense of recession working to depress buyer confidence thereby causing continued and even accelerating declines in housing demand.
As usual, NAR Senior Economist Laurence Yun makes another attempt at self interested spin and false optimism suggesting that home sales will rise “notably” by the second half of the year as a result of the new super jumbo GSE “conforming” loan limits.
“The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions, … Therefore, a notable rise in home sales can be anticipated in the second half of the year."
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 national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (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.Look at the January’s seasonally adjusted pending home sales results and draw your own conclusion:
- Nationally the index was down 19.6% as compared to January 2007.
- The Northeast region was down 28.0% as compared to January 2007.
- The Midwest region was down 13.3% as compared to January 2007.
- The South region was down 23.8% as compared to January 2007.
- The West region was down 12.7% as compared to January 2007.
