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Pending Home Sales Index, NAR Housing Market “Bottoms”

Posted By Barry Ritholtz On January 8, 2008 @ 10:30 am In Data Analysis,Financial Press,Markets,Psychology,Real Estate | Comments Disabled

The National Association of Realtors Pending Home Sales Index has been released, and it is once again, an exercise in spin.

Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise [1]
Over the next few months, existing-home sales are expected to hold fairly steady as indicated by pending sales activity, then rise later in the year and continue to improve in 2009, according to the latest forecast by the National Association of Realtors

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in November, fell 2.6 percent to a reading of 87.6 from a strong upward revision of 89.9 in October, but remains above the August and September readings and indicates a broad stabilization. The index was 19.2 percent below the November 2006 level of 108.4.  “Although there could be some minor slippage in the first quarter, existing-home sales should hold in a narrow range before trending up,” Yun said.

As we previously noted [2] in December, the year-over-year data is what matters, not the monthly changes. This release revealed a 19.2% drop in the index from last year, forecasting not stabilization, but even greater slippage.

However, since the NAR insists on including their cheerful forecasts (i.e., spin) with each data release, why don’t we review their prior prognostications about the Real Estate and housing markets, via Jim Stack’s Investech [3].  Jim writes:

"Most bear markets in stocks result in
investors feeling as if they’re being sandpapered to death. Two steps
down are followed by one step up… then another two steps down.
Meanwhile, each and every step is accompanied by reassurances that a
bottom is at hand and the outlook will soon improve

This has been the same case for the 21⁄2 year-old bear market in
housing. And perhaps there is no better source for tracking and
understanding the psychological roller coaster of the housing bear
market than the National Association of Realtors itself.  As you step
through these media headlines and NAR quotes of the past two years,
it’s easy to recognize the path has been one of denial, unexpected
downward revisions, and erroneous reassurances…"

As proof of this, check out the various quotes Jim gathered from the NAR themselves:

August 2005:

“All of the doom and gloom forecasts of a housing debacle are not only irresponsible, but also downright wrong.”
–David Lereah, National Association of Realtors

April 3, 2006:

Feb pending home sales index down 0.8 pct: NAR

Pending sales of U.S. homes edged lower in February, but a big upward revision to the previous month’s data may suggest the housing market’s cool-off period is nearly over, [the National Association of Realtors] said on Monday.  – Reuters

NAR: “We can expect a historically strong housing market moving forward, earmarked by generally balanced conditions across the country and fairly stable levels of home sales with some month-to-month fluctuations.”

June 27, 2006: 

Sales of Existing Homes Fall in May

Sales of existing homes fell for the third time in the past five month in May, with the weakness led by a big drop in demand in the Northeast.  The National Association of Realtors reported that sales of previously owned homes dropped by 1.2 percent in May to a seasonally adjusted annual rate of 6.67 million.  – Yahoo! news

NAR: “Right now we are on course for a soft-landing in housing.”

October 25, 2006

Homes sales, prices drop in September

The National Association of Realtors said sales of previously owned homes fell 1.9% in September to a seasonally adjusted sales pace of 6.18 million units, slowest sales rate since January 2004.  – Associated Press

NAR: “The worst is behind us, as far as a market correction – this is likely the trough for sales. When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.” 

December 4, 2006:

Pending Home Sales Tumble

The National Association of Realtors’ index for pending sales of existing homes decreased at a seasonally adjusted annual rate of 1.7% to 107.2 from September’s 109.1, the industry group said.  Its index, based on signed contracts for used homes, was 13.2% below the level of October 2005.  – Wall Street Journal

NAR: “It’s important to focus on where the housing market is now – it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high – they’ll stay that way through 2007.”

February 15, 2007:

Record home price slump 

The slump in home prices was both deeper and more widespread than ever in the fourth quarter, according to a trade group report Thursday.
– CNN/Money.com

NAR: “At least the bottom a ppears to have already occurred.  It looks like figures will be 

June 6, 2007:

Home Sales, Prices to Slip Further in 2007: NAR 

Home sales and prices will fall at a faster pace in 2007 than originally expected, a leading U.S. real estate trade  association said on Wednesday.   – Reuters 

NAR: “Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year.” 

August 8, 2007:

Existing-Home-Sales Forecast Lowered 
In its latest forecast for the real estate market,

NAR on Wednesday projected that existing home sales will fall 6.8%  this year to 6.04 million, compared with its previous forecast of a 5.6% decline.
– Wall Street Journal

NAR: “Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who’ve been on the sidelines.” 

October 10, 2007:

Realtors group lowers sales forecast 
The decline in sales of existing homes this year will be steeper than previously anticipated, a trade group for real estate agents said Wednesday.  The eighth straight downwardly revised forecast from the National Association of Realtors calls for U.S. existing home sales to be 10.8 percent lower than last year as housing market struggles persist.  – Yahoo! news 

NAR: “The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels…” 

November 15, 2007:    

Realtors revise home sales forecast lower again 
The National Association of Realtors said Tuesday that sales of existing homes in the U.S. are expected to decline to a five-year low this year, and the outlook for 2008 is worsening.  – USA Today 

NAR: “It is possible for even higher home sales activity than we’re forecasting if buyers regain 
their confidence.” 

December 10, 2007:

Housing market is stabilizing, optimistic Realtors say 
Bucking conventional wisdom, a trade group for real estate agents said Monday that the battered housing market is on the verge of stabilizing and inched up its outlook for 2007 and 2008 home sales.  The revised monthly forecast from the National Association of Realtors, which followed nine straight months of downward revisions, calls for U.S. existing home sales to fall 12.5% this year to 5.67 million – the lowest level since 2002.
– USA Today

Jim adds that "the value in reading this chronology of missteps lies in maintaining one’s objectivity going forward. Based on building permits (at 14-year lows), housing starts (also near 14-year lows), and NAHB Builder Confidence (hitting 23-year lows), it is far too early to proclaim that a bottom is at hand or housing has stabilized."

Indeed . . .



Sailing Deeper Into Uncharted Waters [4] 
Jim Stack
Investech, DECEMBER 14, 2007

Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise [1]    
National Association of Realtors
January 8, 2008

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2008/01/pending-home-sales-index-nar-housing-market-bottoms/

URLs in this post:

[1] Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise: http://www.realtor.org/press_room/news_releases/2008/pshi_jan08_stable_existing_home_sales.html

[2] previously noted: http://bigpicture.typepad.com/comments/2007/12/anotehr-wtf-mom.html

[3] Investech: http://www.investech.com/

[4] Sailing Deeper Into Uncharted Waters: http://www.Investech.com/

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