PHSI Gains 1.1%
Here is a bit of genuinely good news: The NAR’s Pending Home Sale Index rose 1.1% from March 2008. The less significant monthly gains were also positive, rising 3.2% from February to March 2009.
As previously noted, this index is based on signed contracts, most of which will close 30 to 90 days later. This gives us an early read on the Existing Home Sales for June/July.
Its noteworthy that most of the gains came in the regions with the highest foreclosures: The South and West gained, while the NorthEast and Midwest fell.
Of course, the NAR cannot help but accentuate the positive regardless:
Pending home sales rose with many first-time buyers taking advantage of historically good housing affordability conditions, according to the National Association of Realtors.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in March, increased 3.2 percent to 84.6 from a level of 82.0 in February, and is 1.1 percent higher than March 2008 when it was 83.7.
Lawrence Yun, NAR chief economist, said it should take a few months for the market to gain momentum. “This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a downpayment,” he said. “We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around.”
At least these guys are consistent: They spin regardless of whether the data is good or bad . . .
Source: Asha G. Bangalore, Northern Trust Global Economic Research
>
Previously:
NAR Housing Affordability Index is Worthless (August 13th, 2008)
http://www.ritholtz.com/blog/2008/08/nar-housing-affordability-index-is-worthless/
No, Pending Home Sales Index Did Not Rise (December 2007)
http://bigpicture.typepad.com/comments/2007/12/anotehr-wtf-mom.html
Pending Home Sales Index, NAR Housing Market “Bottoms” (January 2008)
http://bigpicture.typepad.com/comments/2008/01/a-history-of-ho.html
Source:
Pending Home Sales Rise, Housing Affordability Near Record
NAR, May 04, 2009
http://www.realtor.org/press_room/news_releases/2009/05/march_phsi
May 4th, 2009 at 10:56 am
I’m getting more and more inclined to go with the camp that see’s a W double dip variety coming. I think we may see continued “improvement” like this in the coming months but it will prove to be a mirage as it falls apart again. It’s clearly not a solid foundation for a sustained recovery until we see structural changes to the economy that will allow for the unemployment situation to turn around. That will take a lot of time. We shall see, I guess.
May 4th, 2009 at 10:58 am
Here in Boston, we make well above the average income for the area, yet, I would say we still cannot afford the AVERAGE home in the area without leveraging up to our eyeballs. I don’t know what the f— the NAR means by “very favorable affordability conditions.” Perhaps I’ll buy once home prices are 20-30% lower from here and we’re looking at sub-4% 30 year mortgages. Just my opinion, I guess.
HCF
May 4th, 2009 at 11:03 am
@Mannwich:
> I’m getting more and more inclined to go with the camp that see’s a W double dip variety coming.
I’ll second that sentiment. The question is how deep the second “V” in the “W” will be. My completely unscientific guess for the last year has been 4,000-6,000 on the Dow. Not quite apocalyptic, but low enough that my co-workers think I’m nuts when we discuss markets.
I’ll say that if we break 5,000, I will be VERY bullish.
HCF
May 4th, 2009 at 11:04 am
First, the good news: Larry Yun is alive and well! I had been so worried.
Now, the bad news: Housing prices will decline to 1999 levels, or lower, in nominal terms.
This projection is based on an extension of the nominal value, charted over time (http://mysite.verizon.net/vzeqrguz/housingbubble/), flattening the trend line to remove the effects of the bubble years.
Keep in mind, there has been no increase in income for the vast majority of Americans during the bubble years (nominal or real), that the credit-worthiness of most American is worse now than it was then, and that traditional loan to income ratios will be the measure of who qualifies for a loan, and who doesn’t, going forward.
May 4th, 2009 at 11:08 am
Oh yeah, and let’s not forget — the banks are already insolvent, and we haven’t even begun to assess the damage to them from CRE defaults or CC debt defaults.
A taste of what’s to come in CRE, here:
http://globaleconomicanalysis.blogspot.com/2009/05/how-banks-become-condo-rental-agents.html
May 4th, 2009 at 11:10 am
A comment on some blog (perhaps this one) a few weeks ago made the perceptive and important point that because such a large fraction of sales to first-time buyers is of foreclosured homes, the impetus to the “move-up market” is much weaker than in normal markets.
Whereas in normal times many first-time buyers’ purchases result in the previous occupants buying more expensive homes, in this market they just take a home off a bank’s books, and the previous occupant moves not up into a McMansion but rather down into an apartment, or even back in with their parents.
May 4th, 2009 at 11:13 am
This morning’s enthusiasm makes me think:
“Don’t just *stand* there. Log into your trading account and *buy* something.”
May 4th, 2009 at 11:15 am
The issue is not whether people ‘want’ houses, it is whether their job, earnings, credit rating, ability to make a down payment and ability to sell an existing home allow them to buy one.
These are the big issues and the reality is out there, big as life, for all to see. A few squiggely percentage points up and down is meaningless.
The only real ‘green shoots’ out there were fully bought and paid for by us: they are due to substituting government guarantees for private guarantees in some parts of the banking industry. Those obscure reality and make it impossible to know what is really happening.
May 4th, 2009 at 11:20 am
We have learned nothing:
“Construction spending rises unexpectedly in March”
http://finance.yahoo.com/news/Construction-spending-rises-apf-15118435.html;_ylt=ArfR3×6xWVKnnSTxmap0×1i7YWsA?sec=topStories&pos=1&asset=&ccode=
Rally!
May 4th, 2009 at 11:23 am
Jeff, sorry to say but you will not only get a “W” double dip coming, you will actually have something like “WWWWWWW”. Or maybe it is more like “ZZZZZZZ”. There just is nothing to drive economic growth fundamentally for the foreseeable future, but the Fed and Treasury have too much money printing and borrowing capability – without much risk of currency-driven inflation, BTW (resource-driven, yes) – for the economy or the markets to make a significant move down.
Eric Janszen of iTulip wrote last year that green tech would be the next bubble. We should be so lucky. Obamanomics subsidizes Wall Street $100 – 1,000 for every $1 it allocates to solar panels, so the government is not trying to create a new green bubble, it is trying to reinflate the old one.
Yawn.
May 4th, 2009 at 11:25 am
@Marcus: I’m telling you, they’re still building homes and a lot of CRE here in the TC even though “For Lease” and “For Sale” signs are everywhere. It’s like we just woke up from a bad, bizarre nightmare and it’s business as usual again. Nothing suprises or even stuns me anymore these days.
May 4th, 2009 at 11:34 am
I have seen very few claim that we are just like Japan in the late 80s. There is always some reason we won’t follow their path. Either we are supposed to recover better than Japan (US Gov’t doing better job dealing with crisis is the usual reason), or we will not do as “well” as Japan (low saving rate is usually the reason). Seems to me, more and more, we are on the same path. Which is more positive than many of the doom and gloom predictions, but really sucks for investing in stocks.
May 4th, 2009 at 11:36 am
@mannwich, what is TC?
May 4th, 2009 at 11:36 am
With the Fed buying or planning to buy $1.25 trillion worth of MBS, representing about 1/10 the value of the entire housing stock of the US, how could it possibly be otherwise that the market might show some life? Put enough lipstick on that pig, and by your fifth or sixth drink, you’re ready to take her home to meet the parents.
Alas, it is a delusion, as is all such monetary mischief. MA is on the right track. Housing prices have to go down until the real median price of a house is more in line the historical relationship it has had with the real median income, and perhaps even overshoot a bit on the way. Income has been more or less stagnant for three decades plus, and house prices would have been too, had not the Fed tried to promote the laundering of Chinese trade surpluses through housing “investments” in an attempt to keep real wages in the US from precipitously declining.
May 4th, 2009 at 11:39 am
Twin Cities.
May 4th, 2009 at 11:40 am
@Wunsacon: This morning’s enthusiasm makes me think:
“Don’t just *stand* there. Log into your trading account and *buy* something.”
Like a double short ETF for example? That’s what I was thinking. :-) My friends who are the most gullible broker fodder or “InvestTools”™ are talking about buying in now, so this rally must be getting very very old.
Manny, dead right on the W-shaped recovery, which many people had predicted. THE question has always been, where is the middle going to be? 875, 880, 900 or 1000?
I am pretty happy with some of my longs here, like GMO and VLO. I bought UEC in the 20c and 40c range in the fall. $1,46 today. Of all of my mistakes, this was not one of them.
May 4th, 2009 at 11:46 am
Me-thinks the next few waves of layoffs in the coming months will be telling. More and more people who thought they were “safe” (e.g. many of my wife’s colleagues, no doubt…….we’re under no delusion she is safe because her company is NOT safe by any means) will quickly lose that “confidence” and “green shoots” feeling when they’re home and out of work and/or their friends are…….
May 4th, 2009 at 11:47 am
To address one of the gloom and doom scenarios (the continued debt unwind will come to a crisis point again, or things will just get worse and worse in every way), I will say, the Japan example shows controlled prolonged pain (almost at a level you can become used to) is an option. The huge debt will have consequences, but it may just be a very very long time with slowly dropping living standards. It will suck, but don’t worry too much about capitalizing on a crash. It may happen (the second crash), but the odds are against it.
May 4th, 2009 at 11:52 am
Mannwich,
Estimates I’ve seen here in Mpls are that 30 to 47 percent of architects are now laid off. Yes, some construction continues – it will not go to zero – but I think there will be an adjustment to a new level.
May 4th, 2009 at 11:53 am
For all those (who I respect) with an itchy trigger finger to get short here (like me), a word of caution.
The bulls are still in control. The price action is not bearish on short to medium term time frames yet. Catching the cusp of a move is high risk.
May 4th, 2009 at 11:55 am
The high end of the housing market has nowhere to go but down. At the moment it just isn’t going anywhere.
After we see this rally finally stall, I would expect a rapid exit from recent “inwestors” to set in motion a screaming leg down in the stock market. Manny is right – there are a lot more layoffs coming. In recessions as deep as this, companies get rid of all the empty suits and the clerical people who can’t spell and are a total waste of space. Right now, looking around I don’t see that happening yet. As unemployment continues to march upwards, the “negative wealth effect” should start to kick in very seriously at the upper end of the housing market. Think people bought those $2M houses with cash? Think again, realtards…
May 4th, 2009 at 12:05 pm
@wally: I’ve seen quite a few new quite sizable CRE projects being completed in St. Louis Park, Hopkins, and Eden Prairie. Not yet done but getting close. Who in the world is going to fill these spaces any time soon?
May 4th, 2009 at 12:19 pm
Mannwich,
I drive by them, too, and wonder. Meanwhile, the owner of Knollwood and Eden Prairie malls is BK, Opus South is BK…
May 4th, 2009 at 12:22 pm
@wally: And Southdale Mall (America’s first mall) looked like a ghost town on Sunday. Granted it was Sunday afternoon and the weather was great, so who wants to be in a mall on the few nice days we get here? I was there to quickly exchange something and get out but it was very quiet in there. Thought I was going to see some tumbleweeds roll by. A bit eerie, although the guy at Macy’s told me that business has been great lately. Not sure what/who to believe there. Maybe it’s been great because they mail out promotional 50% off or more discounts to people like my wife just about 4-5 days a week! Not sure what that’s doing to their profit margins though.
May 4th, 2009 at 12:35 pm
Don’t know much about housing, but what about the 600K or so homes being kept off the market by banks? What happens when foreclosure moratoria end? Don’t these things artifically goose supply/demand?
May 4th, 2009 at 12:35 pm
Today feels like a blow-off top. So many people were set up short at 875-880. The 7% rise in the FXI and EWT must have been boosted by short covering. Not much doubt that conditions are ripe for a reversal here. Treasuries have already turned. Jeff Saut this morning has pointed out we are at day 38 now, and the longest bear market rallies in history are 40 days. It’s coming.
May 4th, 2009 at 12:40 pm
They may be goosing it for the ’sell in May go away’ theme
May 4th, 2009 at 12:41 pm
These “green shoots” look more like poison ivy to me. Waiting on trends can be so nerve wrecking. The S&P looks like it will trend up if it closes higher today (according to 3LB) BUT it just doesn’t feel like it’s justified. I may hold off until after the fake stress test results and Employment Situation report comes out.
May 4th, 2009 at 12:48 pm
I’m with you Lefty, I’m recalling a blow off top last May (think it was the 21st) where we saw a 400 points reversal on the drop of a dime.
Small caps are killing it today, and SRS and FAZ are finding stability. The Vix is also up on a 160 pt day
P.S. Joe Terranova is a clown
May 4th, 2009 at 12:58 pm
hopeImwrong @ 11:53
“For all those with an itchy trigger finger to get short here a word of caution. …Catching the cusp of a move is high risk”.
I agree. Going short here is a high-risk proposition.
But let me add that going 100% long here, at this point, is fraught with at least as much risk (if not more).
May 4th, 2009 at 12:59 pm
“@mannwich, what is TC?”
TC (for Twin Cities) appears as the logo on the baseball caps for the Minnesota Twins.
May 4th, 2009 at 1:10 pm
May 4th, 2009 at 1:39 pm
@DL – Agreed, high risk for longs and shorts here. But, I have to defer to the price action (not the economy) when it comes to what is higher risk. Longs and shorts both need tight stops.
May 4th, 2009 at 1:51 pm
hopeImwrong,
tight stops has to be the watchword.
the thing about fading Calls to get ‘Long’, is that the cover, buy the underlying, creates a “Buy/Write” in reverse fashion..
the Real Risk is foregoing the higher Rate-of-Return available from doing the “Buy/Write” at the drop..
and, remember, it’s a Market of Stocks..
http://finance.yahoo.com/q?s=MO
May 4th, 2009 at 2:31 pm
Wasn’t it just a day or so ago that a topic was of how the thirty percent of homes with no mortgages were skewing some data? Could we take that a step further and assume that those with no mortgage, or a very small one, are mostly populated by baby boomers nearing retirement?
Being of that category I can say that in my circle of friends we are all now looking at retirement homes in some areas of the RE bust. Although house prices where we live have fallen maybe twenty or at most thirty percent, we can trade “down” to more house (or at least more land) at a cheaper prices, in areas of extreme speculation, and have cash to spare.
The second houses many speculated on and that are now in foreclosure are often in desirable “vacation” areas of the country – just a little too far from the city jobs for a commuter. Many have vibrant communities (but few professional jobs) and are thus ripe for the pickings of a retiree with cash (or a salable house with decent equity). Many of these out-of-city locations have property tax advantages that are outstanding.
May 4th, 2009 at 3:36 pm
dps,
I’d lean toward more Land, less House..
also, investigate the Environmental background of the areas you’re serious about–sometimes old mining areas have destroyed the ground water, for ex.–and the Realtor isn’t the source for the info (:
“thus ripe for the pickings of a retiree with cash (or a salable house with decent equity). Many of these out-of-city locations have property tax advantages that are outstanding.”
also, plan for higher Taxes, and higher cost of Energy inputs..
but, with that, totally, there are RE deals that are very attractive..
May 5th, 2009 at 10:19 am
Here what I see as a first time home buyer. (just closed last week) Barry has blogged about the owning vs renting curve and I believe that they are close enough where people are starting to buy again. Our mortage is less than our separate rent combined. The $8000 tax credit tipped us to buy.
We did find a foreclosure but when the housing market was over priced there was no way we could afford a house. Now we have the house and make trips to our local home supply store like 3 times a week.
I think that the inventory of bad assets need to be bought up before it will drive demand for new. Then prices will rebound. We paid $179,000 for a house that sold for $320,000 two years ago. Three more on our block just sold for the same. When those are gone it will be game on again for the market. Funny thing is that there is several new condos going in the area which are smaller but priced compareable to what we just paid. The builders have adjusted to the new market.
This is for Nashville does anybody see the same in other cities?
May 5th, 2009 at 3:04 pm
mdave,
remember, not only housing prices, in the ‘housing market’, are falling..
see if there isn’t a place like this: http://www.millershomesurplus.com/
near you, also, the classifieds, and other ’secondary markets’ are filled with similiar things, at a fraction of retail..
May 6th, 2009 at 5:02 am
[...] Und am Immobilienmarkt gibt es endlich was Positives zu berichten. Und zwar nicht die unhaltbaren Zahlen wie vor ein paar Monaten, sondern “richtige” Fortschritte zum Vorjahreszeitraum (auch von “bearish”-en Barry Ritholtz bestätigt). [...]