Signed contracts on homes
Pending home sales or signed contracts on homes are down 1.2 percent in August from July but up 7.7 percent from August 2010, according to the National Association of Realtors. Additionally, there was inconsistent performance by region with some performing well and others poorly.
The pending home sales index fell 5.8 percent in the Northeast for the month, but has risen a slight 1.3 percent over the year, with the volume of signed contracts (and interest in sales) remaining stable. Pending home sales also experienced a decline in the Midwest, dropping 3.7 percent from July but is up 8.2 percent over the year, a promising data point for the region.
The South region saw a rise in contracts signed of 2.6 percent and has risen a total of 7.6 percent over the year and although the West region dropped 2.4 percent for the month, it has seen a 10.5 percent over August 2010, the biggest jump of any region.
Lawrence Yun, NAR chief economist, said the decline reflects an uneven market. “The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August,” he said. “But broadly speaking, contract signing activity has been holding in a narrow range for many months.”
Yun said the market is underperforming given a pent-up demand in household formation. “We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” he said. “Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy.”
Is data better than NAR claims?
MarketWatch columnist, Lee Adler wrote, “It is clear that the collapse in prices is beginning to at least bring some buyers back into the market. While a high percentage of contracts are still falling through, this increase in demand over last year’s levels is not a one-month wonder. It has now persisted for four months. It is not yet up to 2009 levels when the market was false stimulated by government tax breaks to buyers, but it is 3.4% above 2008 levels.”
Adler notes, “As it turns out, the NAR is screwing its own pooch because the actual, not manipulated data is actually much better than the seasonally smoothed numbers imply. That’s not to say sales are great. They remain 25% below the peak levels reached during the bubble, but the fact is that sales were up in August, and not just by a little. They were up by 9.4% month to month, and were 13.1% above the level of last August.”