According to the National Association of REALTORS, the pending home sales index inched up 3.2% from last month and 1.1% from last year to 84.6.
The index is an indication of the number of properties that are currently under contract and are expected to close within 30-60 days.
As I have written about several times before, "context" is what is needed in order to put this data into perspective. Because as we are seeing, Wall St. along with CNBC and other media outlets are thirsty to make a positive story out of fairly irrelevant data.
So here is some context for you in terms of the pending home sales index relative to existing home sales.
2006: 111.9 / 6.478 million existing home sales
2007: 96.3 / 5.652 million existing home sales
2008: 87.1 / 4.913 million existing home sales
And here we are in March of 2009 and we are on a pace for 4.57 million existing home sales and the average pending home sales index through the first three months of the year (including March at 84.6) is 82.3.
In other words, existing home sales and the pending home sales index are still in a bottoming process. But more importantly, what a lot of people seem to misunderstand is that even if home sales are indeed at a bottom, there is no indication that home values are anywhere near a bottom. And the simple reason is that home values are driven by supply and demand. And by most estimates, we are nowhere near exhausting the supply of foreclosures. Between foreclosure moratoriums, shadow inventory, mortgage resets, and job losses, there are still millions of homes that will go into foreclosure over the next three years. Demand, at this current pace, is insufficient in being able to absorb this excess supply.