Pending Home Sales Are Up, But Does It Matter?

In light of Wall St.'s sucker rally last month in response to NAR's wildly inaccurate pending home sales index results, I wrote a post detailing just how irrelevant this data was becoming.

Here is what I have found in terms of the relationship between the pending home sales index and the following month's existing home sales.

October 2008 Pending Index -0.7% / November 2008 Existing Home Sales -8.6%

November 2008 Pending Index -4.0% / December 2008 Existing Home Sales +6.5%

December 2008 Pending Index +6.3% / Janaury 2009 Existing Home Sales -5.3%

January 2009 Pending Index -7.7% / February 2009 Existing Home Sales +5.1%

February 2009 Pending Index +2.1% / March 2009 Existing Home Sales -3.0%

March 2009 Pending Index +3.2% / April 2009 Existing Home Sales +2.9%

April 2009 Pending Index +6.7% / May 2009 Existing Home Sales ???

Outside of the most recent existing home sales data in April, the pending home sales index has revealed that the margin for error in predicting existing home sales within a 30 day period can have a variance of as much as plus or minus 12%.  Predicting home sales within 60 days can be off by as much as 7%.  In other words, the margin for error in this data has become so significant that the data itself has become anecdotal at best.

So when the NAR published their April pending home sales index yesterday that showed a reading of 90.3, an increase of 6.7% from the previous month, you have to wonder if it really indicates anything at all?

The last time we saw this big of a jump in the index was in December of 2008 when the index surged 6.2% , only later did we see that existing home sales actually plunged -5.3% the following month.