Wobbling pending home sales
After nine months of pending home sales inching up, November’s stats released today by the National Association of Realtors reveals that the pending home sales index fell 16% in November as seen by the recent nosedive in the chart above, putting us back roughly to the level we were at in November of 2008 (which won’t exactly go down in history as a good month for the real estate industry).
Just last month, NAR Chief Economist Yun said about the ninth month of rising pending home sales, “still, as inventories continue to decline and balance is gradually restored between buyers and sellers, we should reach self-sustaining housing conditions and firming home prices in most areas around the middle of 2010. That would mean broad wealth stabilization for the vast number of middle-class families.”
Just one month later, Yun said, “it will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit.” Yun noted, “We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires.”
After a great deal of money was poured into the loud campaign urging buyers to rush to beat the November 1st tax credit deadline, the credit was extended, leaving many agents to feel as if they cried wolf and lost ground in consumer trust. The 16% dip is easily pointed to as a result of the perceived November 1st tax credit deadline, yet many consumers we’ve spoken with didn’t know the credit has been extended.
Now we’re left to wonder if a stable market will come in mid 2010 as stated by Yun in December or will stabilization occur much later as many consumers are not aware the tax credit was extended and no longer have an impending emergency reason to buy and are sitting still waiting for a reason?
Some parts of the nation are doing much better this year- the West declined 2.7% but is up 21.4% over November 2009 while the Northeast dropped a heartbreaking 25.7%, dipping much lower than the national 16% drop.
How do we get out of this mess?
We got excited at the chart above climbing and climbing, just to experience yet another slap in the face to the real estate industry. Today, it was announced that the U.S. dollar fell and the 16% drop in pending home sales didn’t help and if any hint of job growth comes around, the Federal Reserve will likely raise interest rates sooner than later to help the value of the dollar.
The weaker housing data backed comments by Federal Reserve Governor Elizabeth Duke on Monday that there were still strong headwinds in the housing market and the Fed needs to keep interest rates “exceptionally low” for an “extended period.”
With telling news of pending home sales down as well as news of construction spending dipping, The Fed will have to get involved to change the course of this mammoth ship and the Government may have to continue backing the market with tax incentives.
“Sales should rebound going forward. Nevertheless, this report suggests that the recent strength of housing demand is still far from becoming self-sustaining and that the housing market remains overly dependent on government support,” Anna Piretti, an economist at BNP Paribas in New York told Reuters.