Existing-Home Sales Up, But Not All It's Cracked Up To Be!

Mortgage and Lending with Canopy Mortgage, LLC NMLS 124492

Sign - House Sold! | iStockphoto.comDid you hear? Existing-Home Sales Jump To Highest Level in 2-1/2 Years as reported early this morning. According to the official release from the National Association of Realtors® (NAR) existing-homes sales surged a surprising 10.1% in October.

The only thing surprising about this number is the fact that many in the real estate industry had not expected or anticipated such an increase. What's even more surprising is that with the new peak in existing-home sales report that forecasts are being revised for the recovery of the housing market effective today.

Let's rewind and figure out what today's report really means and how the real estate industry got to this point.

To begin with, according to the NAR Existing-Home Sales Methodology the NAR capture 30-40% of all existing-home sale transactions with its monthly survey. Before they can become an existing sale, a contract would have had to been written which generally involves the services of a Realtor®.

This would have been measured by the Pending Home Sales Index (PHSI). The interesting thing about this index is that it attempts to predict future sales. According to NAR the PHSI only accounts for 20 percrnt of all transactions of which 80% close within 60 days while the remainder close within 4 months.

Do you remember what the headlines were a couple of months ago? Let me give you a hint. It had to do with the steady growth in the Pending Home Sales Index. This latest report will definitely create even more confusion to home sellers and buyers throughout the country.

For all the positive spin the media is broadcasting across the news wire, there are some startling facts hidden within the report. Did you also hear that the national median home price dropped 7.1% and that 30% of all sales in October were distressed sales. Try explaining that to sellers.

Existing-Home Sales Up, But Not All It's Cracked Up To Be!

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Comments (31)

Robin Dampier REALTOR®
Coldwell Banker King - Hendersonville, NC
Hendersonville & Western NC Real Estate Source

Thank you for a very insightful perspective.  Statistics can mean whatevery you want them to mean.  I feel there is a lot of "spin" going on re the housing market statistics.  Politically the uptick is great and the stock market loves it -- but depending on the local area the headlines must be very confusing to buyers and sellers.

Many areas perhaps are seeing increased sales, reduction in inventory but at what loss of equity to the sellers who must sell by short sale or go into foreclosure.

I may have become very skeptical in my old age but I doubt things will be all dancing in the streets, wine and roses in any time next year for many areas.  I think this recovery will take a while.

Sue of Robin and Sue

Nov 23, 2009 03:54 PM
Jane Cross
Homes By Cross serving Charlotte NC Real Estate Needs - Charlotte, NC


Those reports hold true for our market. Our October numbers looked like the sellers have finally bottomed out. Let's hope that holds true. And for the buyers...well, Spring season is just around the corner, and we have definitely seen an increase in activity.

The best piece of all of this news, whether you are in housing or not, the sales, are a good indication, that consumer confidence is up. There can be nothing bad about that...peace in the land:)

Nov 23, 2009 09:02 PM
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

We had more sales here in Ann Arbor in October too, but the sales prices was lower. Prices are driving the market. It is forcing sellers to lower and be more competitive.

Nov 23, 2009 11:12 PM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Saturday's paper had front page headline's proclaiming we were up 26%(in last 4 months) !!! The articles last two paragraphs did say however our prices continue to slide !

Nov 23, 2009 11:42 PM
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass


It's part of NAR's job to paint a Rosy picture of the housing market for the public. And, they usually manage to put a positive spin on it no matter what.  However, the rate at which house prices have been dropping over the past few years is simply not Rosy, no matter what anyone says to the contrary.


Nov 23, 2009 11:46 PM
Frank Kliewer
Woodinville, WA

Just out from Case-Shiller this morning, they are stating that overall home prices rose for the 4th straight month and citing this as a sign the recovery is continuing . . . one can hope.

Nov 24, 2009 12:51 AM
jill Sjolin

The power of positive thinking can work and rub off onto others! Sell, sell, sell, buy, buy, buy. Warren Buffet is buying companies while prices are low and believes we have "neared bottom".  Real estate, all time low prices, invest people!

Nov 24, 2009 02:29 AM
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Sue - You are correct that any data can be molded into information. It definitely comes down to your own local market in terms of the reality of the report.

Jane - It's fantastic to hear that your market is stabilizing. I wouldn't go so far as to say existing sales are a direct correlation to consumer confidence. Let's way to see how Black Friday turns out.

Missy - I have heard that the same sentiment from real estate professionals throughout the country. Sales up, prices down. Unfortunately, the seller only hears sales are up.

Michael - Headlines sell newspapers. By the way, you still get the newspaper? Oh vie! LOL

Claudette - I'm not here to criticize the NAR, but you are correct that as an association they definitely emphasize the positive aspects of every report.

Frank - Don't get me started on the inadequacies of the Case-Shiller report.

Jill - If I had billions of dollars at my disposal, I would be buying left and right. As-is, I am just a pawn in this big game of real estate trying to make my next move count.

Nov 24, 2009 02:57 AM
Dan Quinn
The Eric Steart Group of Long & Foster Real Estate - Silver Spring, MD
Dan Quinn

Distressed sales - that is what we are looking at in our market. 

We moved a lot of bank properties, good news for sure, yet we've got a lot more to come.  Couple that with the homeowners who decided not to put their house on the market this fall and wait for the spring market thinking that prices will improve, and what do we get...?  I see inventory rising on the horizon.

I don't think we are out of this yet.

Nov 24, 2009 03:42 AM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

It doesn't make sense to me to use a pending home index especially since so many of our pendings are short sales which can definitely skew things.

Nov 24, 2009 03:59 AM
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Dan - It has been stated by the likes of Diane Olick that distressed sales are artificially inflating the existing home sales as they have been processed twice since the beginning of the summer. Inventory levels will increase as a normal part of the real estate cycle in the spring. Make sure to keep an eye for the wave of foreclosures just over the horizon as well.

Christine - Pending Home Sales Index is a forward looking measure of the housing market and if you are accurate in your assessment, then future existing sales may continue to improve. The caveat is that the median sales price will continue to plummet. No one really likes the scenario much.

Nov 24, 2009 04:53 AM
Christianne O'Malley
Dickson Realty - Reno, NV
Exceptional Service - Delivering Results in Reno!

The entire misnomer that business is up is because of the artificial stimulation of the market with the tax credit. We won't know what our housing market really looks like until the artificial influences are ended.

Nov 24, 2009 06:39 AM
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Christianne - Artificial or not, the closed sales are real. Now it is a matter of how we can sustain the volume of transactions and get home values moving in an upward trend for sellers, buyers and existing home owners.

Nov 24, 2009 06:47 AM
Jeff&Grace Safrin
F.C.Tucker 1st Team Real Estate - Valparaiso, IN

James - we always use GNIAR stats when doing our "state of real estate reports" for F.C.Tucker.

We've noticed over the years that rosy NAR data does not apply to NW Indiana - I'll be doing a post soon on YTD Residential Real Estate CLOSED 2008 vs 2009 Jan thru October and all 3 counties Lake, Porter & LaPorte are down in sales and price this year as compared to last - even with the 1st time home buyer incentive!

pendings mean nothing nowadays iwth the Havoc of HVCC :)


As always- great post



Nov 24, 2009 08:55 AM
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Grace - As they say, real estate really is local. Glad to hear that you are leveraging local data to demystify the headlines.

Nov 24, 2009 09:01 AM
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

James, NAR is doing its best to keep the public's confidence up and taking every opportunity to promote even a slim glimmer of hope.

Nov 24, 2009 12:38 PM
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Alters - I'm all for being positive. At times though I feel as if NAR is spinning the the headlines like the Obama administration tried to do last month about how many jobs have been saved through the stimulus money.

Nov 24, 2009 01:55 PM
Cheryl Ritchie
RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD
Southern Maryland 301-980-7566

7% and 30%...that stops you in your tracks with a dose of reality. Thanks!

Nov 25, 2009 09:42 AM
James K Barath, CMPS
Canopy Mortgage, LLC - Crown Point, IN
FICO Pro, Certified Military Housing Specialist

Cheryl - A dose of reality showcased properly can actually be a motivator. Use wisely.

Nov 25, 2009 09:56 AM

HI James


I had a question and a comment.  My comment is tha tI love your article  and I hope you keep wriitng informative stuff.  My question is tha tI work on a website that deals with commercial real estate in Indianapolis, In.  Do you think that commercial office space in Indiana is gonna bounce back in relation to residential.  The website I work from is www.officespaceheaven.com/indianapolis.html.  Let me know your thoughts.




Nov 25, 2009 04:23 PM