Pending Home Sales Inch Up 3.2%

Real Estate Broker/Owner

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.


Comments (6)

Amanda Wilson
EWM International Realtors, Inc. - Fort Lauderdale, FL
Real Estate Advisor

Mark--Pending sales always seem to be up--it's the closing sales I most the pending sales in South florida are short sales--and right now, about 3 out of every four actually close!  thanks for the stats

May 04, 2009 03:24 AM
Ken Tracy
Coldwell Banker Residential - Naperville, IL
Helping clients buy and sell since 2005

Hi Mark.  Yes, the media does seemed starved for positive news on the housing market.

I have seen some stats twisted lately to make it seem like real estate is back.

Still skeptical here in Naperville!

Thanks for writing,


May 04, 2009 03:41 AM
John Mulkey - Waleska, GA
Housing Guru

Those who only look at the superficial value of these numbers will continue see a turnaround in housing.   Should be good for a 200 point rise in the Dow : )

May 04, 2009 03:43 AM
Tina Maraj
RE/MAX One - Fullerton, CA
Celebrating 30 Years of Real Estate Sales

Hi Mark, Yell it from the roof tops! It's great to spread the good word!

May 04, 2009 03:44 AM
Mark MacKenzie
Phoenix, AZ

Amanda:  Agreed.  The more I follow this NAR indicator, the less stock I put into it.  There seems to be +/- 5% accuracy with it in predicting actual sales.

Ken:  Skeptical is the right word I think. :)

John:  So true. :)  That is why I like to write about the context of the numbers, I don't think a lot of people realize how much of a headwind the housing market is facing.

Tina:  There is more to the post than the headline. :)


May 04, 2009 03:49 AM
Mark MacKenzie
Phoenix, AZ

John:  This is the headline on CNBC right now:  "Pending Home Sales Rise 3.2%, Signaling Market Near Bottom"

We still have a 9.8 month supply of housing, we have millions of mortgage resetting over the next three years, we have had foreclosure moratoriums, shadow inventory, and job losses, but this is a bottom?

May 04, 2009 03:53 AM