Monday, June 09, 2008

Pending Home Sales: April 2008

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for April showing a continuation of the spring sales build while still remaining historically weak with a 13.1% year-over-year decline.

As the decline in demand for residential housing slumps through its third year, it’s important to consider the significance of the extent of the decline.

It is very likely that we are now seeing the spiraling feedback effect of sharply declining prices and both the palpable sense and actual effects of recession and higher energy prices all working to depress buyer confidence thereby causing continued declines in housing demand.

As usual, NAR Senior Economist Laurence Yun continues his self-interested spin suggesting that today’s results indicate that “bargain hunters” are on the prowl.

“Bargain hunters have entered the market en masse, especially in areas that have experienced double-digit price declines, but it's unclear if they are investors or owner-occupants,"

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 April’s seasonally adjusted pending home sales results and draw your own conclusion:

  • Nationally the index was down 13.1% as compared to April 2007.
  • The Northeast region was down 12.2% as compared to April 2007.
  • The Midwest region was down 13.1% as compared to April 2007.
  • The South region was down 22.5% as compared to April 2007.
  • The West region was up 4.0% as compared to April 2007.