Tuesday, November 13, 2007

Pending Home Sales: September 2007

Today, the National Association of Realtors (NAR) finally released their Pending Home Sales Report for September 2007 showing yet again a truly stark and horrendous continuation of the historic decline to residential housing on a year-over-year basis, both nationally and in every region.

We are now firmly heading down the second slope of the pullback in residential housing demand with the Northeast, Midwest, West and the National regions having now fallen over 30% BELOW the seasonally adjusted home sales activity recorded in 2001, the first year Pending Home Sales were tracked.

As usual, NAR Senior Economist Laurence Yun takes another crack at spin and false optimism suggesting that sales will simply flatten out through the remainder of 2007.

“Over the near term, home sales are likely to be fairly flat as the lingering impact of the credit crunch filters through the system through the end of the year.

Even with relatively low fourth quarter sales, 2007 will be the fifth highest year on record for existing-home sales. The median existing-home price in 2007 will have fallen by less than 2 percent from an all-time high set in 2006,”

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).

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 September seasonally adjusted pending home sales results and draw your own conclusion:

  • Nationally the index was down 20.4% as compared to September 2006.
  • The Northeast region was down 23.1% as compared to September 2006.
  • The West region was down 25.6% as compared to September 2006.
  • The Midwest region was down 14.4% as compared to September 2006.
  • The South region was down 19.7% as compared to September 2006.
So it appears that, year-over-year, contract activity is still dropping rather sharply with ALL regions continuing to show significant declines.