The truth about pending home sales

Posted by: Prashant Gopal on September 9, 2008

Last month’s June pending home sales report showed a surprising 5.3% increase in home-sale contracts signed, giving some analysts reason for hope (The increase was later revised to an even better 5.8%).

Pending sales index is considered a leading indicator because contracts are usually signed a month or two before closings, which are tallied in the National Association of Realtors’ existing home sales reports.

Lawrence Yun, the senior economist for the Realtor group, which also puts out the pending home sales index, said at the time: “This is welcome news, because a rise in contract activity is necessary for an overall housing recovery.”

But it looks like June might have been more a blip than the start of a recovery. The Realtors reported Sept. 9 that pending home sales fell 3.2% in July. The truth is that the pending home sales, which have bounced around a little bit throughout the year, have really not budged much since the credit crunch began last August. Pending home sales increased just 0.81% since August 2007.

“I’d describe housing market as stuck in malaise, but it’s not getting materially worse either,” said Mike Larson, real estate analyst with Weiss Research in Jupiter. “We are in a slow bleed phase rather than in a fresh renewed collapse.”

 

About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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