Wednesday, October 08, 2008

Pending Home Sales: August 2008

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for August showing an unexpected 8.8% year-over-year rise in pending home sales primarily fueled by a significant 37.8% year-over-year increase in west coast sales activity.

The peak pending sales month has, in recent years, generally been set during June and, in all likeliness, this year will be no different but another few months of results will be needed in order to determine if the pattern has changed.

Keep in mind that today’s results reflect pending sales that preceded the significant economic shocks experienced during September and October and that, as has been widely reported, many regions are experiencing significant numbers failed home purchases (buyer cannot secure financing) primarily as a result of more stringent lending standards.

As usual, NAR Senior Economist Laurence Yun continues his self-interested spin expressing “hope” that the government takeover of Fannie-Freddie will working to bring rates down and buyers back into the market.

“The improvement also reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.”

The following chart shows the national pending homes sales index since 2005 compared monthly. Notice that each year, the months value is decreasing fairly 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 Augusts seasonally adjusted pending home sales results and draw your own conclusion:

  • Nationally the index was up 8.8% as compared to August 2007.
  • The Northeast region was up 2.0% as compared to August 2007.
  • The Midwest region was up 6.6% as compared to August 2007.
  • The South region was down 2.1% as compared to August 2007.
  • The West region was up 37.8% as compared to August 2007.