Pending sales report: Sign of recovery or meaningless hype?
The National Association of Realtors will release pending home sales stats for the spring market later this morning.
Economists surveyed by Bloomberg are already predicting a 2 percent increase in April over March in homes across the country that have been put under contract.
No one is disputing the fact that even with this modest bump, home sales are still far below those of last spring, when the pending expiration of the home buyer tax credit stoked frenzied buying.
But some market observers are looking to the pending sales numbers as a sign of the market's momentum - according to this theory just about any increase can be construed as a positive development, maybe even a turning point.
Nice try, but that seems a stretch to me. A 2 percent, 5 percent or even a 10 percent increase in pending sales in April over March could be just seasonal variation - no matter how battered the real estate market is, after all, it is still spring.
In fact, seizing upon minor fluctuations in month-over-month sales activity to proclaim a market turnaround has been a specialty of NAR's over the past few years.
Check out this press release from the spring of 2009, in which NAR praises the new, $8,000 home buyer tax credit for stoking market "momentum."
Well we all know how that one turned out.
Washington, May 04, 2009
Pending home sales rose with many first-time buyers taking advantage of historically good housing affordability conditions, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in March, increased 3.2 percent to 84.6 from a level of 82.0 in February, and is 1.1 percent higher than March 2008 when it was 83.7.
Lawrence Yun, NAR chief economist, said it should take a few months for the market to gain momentum. "This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a downpayment," he said. "We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around."
