September 2010 Pending Home Sales index released by the National Association of Realtors® shows a flat existing home sales for the next few months. This is based on Econintersect’s review of the data, and not on the press release which reads in part as follows:
The Pending Home Sales Index,* a forward-looking indicator, rose 4.3 percent to 82.3 based on contracts signed in August from a downwardly revised 78.9 in July, but is 20.1 percent below August 2009 when it was 103.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, said the latest data is consistent with a gradual improvement in home sales in upcoming months. “Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market,” he said. “However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence.”
Although Yun expects a continuing steady rise in home sales from favorable affordability conditions and some job creation, he cautioned any sudden rise in mortgage rates could slow the recovery. “Current low consumer price inflation has helped keep mortgage interest rates very attractive this year. However, recent rising trends in producer prices at the intermediate and early stages of production, along with very high commodity prices, are raising concerns about future inflation and future mortgage interest rates,” he said. “Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs.”
Econintersect reviews unadjusted data. While it is true that the number of pending home sales have increased both on an adjusted and unadjusted basis, the failure is in interpretation of seasonal adjustment factors. The same uptick in home sales occurred in 2009 – and it is believed this is a new normal seasonal trend.
For this reason, there is no apparent upward trend in pending home sales.
What should be apparent from the above chart is a slight downward trend similar to 2009 – but the levels of home sales will be lower than 2009 for the remainder of the year.