Unexpected rise of 0.7% in February pending home sales

[DaisyDuke]

I have a theory about this unexpected rise. I believe that a variety of people were pushing sales in light of the credit tightening just like you hear on the commercials . . . get your loan today since who knows if you’ll be able to get it tomorrow. Your thoughts?

[Happy renter]

I think the 0.7% unexpected rise is only an illusion. It ignores 2 major factors:

1. The pending sales can’t guarantee that all houses will be closed. The fell out subprime and the sentiment of buyers (changing their mind) may affect the percentage of houses being closed.

2. The pending sale is up 0.7%, but it is still 8.5% Down from last year.

The stock is up because the 0.7% rise beats the estimation and the oil is down. It does not mean the real estate is stronger. We will have a bigger picture in summer for both housing and stock markets.

[hipmatt]

Good idea, it could be that, it could be the trigger happy buyers out there waiting for some kind of price reduction no matter how small, and had to pull the trigger on buying a home.

But whatever it is, I believe it is short lived, and the bulls shouldn’t be celebrating as much as they are. All the analysts on CNBC are calling the soft landing scenario as true and a success. LOL! Its all over then, lets go borrow some more money and buy a home!

The foreclosures, short sales, and negative momentum has started its downhill roll. It may hit a few bumps that spit out strange data, but obviously, we have our reasons for expecting a continued decline.

[LookoutBelow]

The first clue that it was "cooked numbers" is the fact the NAR had anything to do with it….Does anybody ever actually believe this crap anymore ?….I mean you'd have to be living under a rock for the last 6 months to not have seen this coming….you'd also think they would have at least heard about the housing bubble  ….

 

Another one of those things that make you go Hmphh.… 

[PerryChase]

hipmatt, I think that they’re are plenty of trigger happy buyers as you call them. They still think that RE only goes up.

A bottom won’t be found until those trigger happy buyers are satiated, and all the reset foreclosures hit the market. The house cleaning has only begun.

[RottedOak]

An increase of 0.7% is a statistical blip. These are only the preliminary numbers, which are almost always revised by the following month and sometimes revised again after that. Here are the PHS index numbers as they were originally announced and as they currently stand for 2006:

Month * Original * Revised * % Revision

Jan * 116.3 * 119.3 * +2.6%
Feb * 117.7 * 119.4 * +1.4%
Mar * 116.2 * 116.5 * +0.3%
Apr * 111.8 * 112.9 * +1.0%
May * 113.4 * 112.7 * -0.6%
Jun * 113.9 * 112.0 * -1.7%
Jul * 105.6 * 107.1 * +1.4%
Aug * 110.1 * 108.9 * -1.1%
Sep * 109.1 * 107.6 * -1.4%
Oct * 107.2 * 106.8 * -0.4%
Nov * 107.0 * 108.4 * +1.3%
Dec * 112.4 * 113.3 * +0.8%

The average change using absolute values is 1.2% — more than the claimed 0.7% month-to-month increase. By the time they finish revising the numbers, the increase could easily be a decrease instead.

[Bugs]

As closely as we are watching these numbers, it amazes me that a couple of our own regulars are concerned about possibly missing out when the market turns.

Trust me, anyone who is paying attention to these indicators will have plenty of time to make their move when the time comes.

[Anonymous]

Call it a dead-cat bounce, stupid buyer syndrome, whatever…but it’s obvious that the media put too much significance on these preliminary February numbers, especially because they’re subject to substantial revision. The stock market is accepting it without any scrutiny.

The stock market is reactive only to short-term news–e.g., the spot price of sweet crude and monthly sales numbers. The focus ought to be the big picture — not just the real estate lending problems, but the record consumer debt.

[DaisyDuke]

Hey, wait a minute, doesn’t the bottom of this site say:

“In God We Trust. Everyone Else Bring Data.”

Bugs, I dunno if I can trust you! 🙂

This bring about a question that has been lurking in my cranium. How come there are no sites (that I have found) dedicated to the camp that there WILL NOT be a serious correction to the housing situation. There certainly is no data, graphs, experts, to support that. Unless I am missing something.

DD

[schizo2buyORnot]

CIRCUMSTANCES WHICH WILL ACCOMPANY A TURN IN RE PRICES . . .

Hmmm . . . stabilizing inventory levels (high but not rising) and now home sales increase slightly and register above expectations and the stock market rallies 120pts. RE Market is down and not going higher anytime soon. The question is what is it going to do??? If I just had that crystal ball . . . . For those worrying about missing the turn in the market (first don’t worry its not turning up anytime soon, it may also not be turning sharply lower however) there historically have ALWAYS been certain precursers to a turn in RE prices. 1st high inventory numbers stop rising, stablize, and begin to fall. Inventory numbers have almost always fallen from their highs by about 35 to 40% before bottomed out prices just begin to perk up. Even then it is a very slow turn as inventory continues to shrink past 50% of the high. Once the 50% of high inventory mark is met . . . it is good to be in front of the coming wave of upward prices. Last time it was a titantic tsunami. Next time who knows it could only be a mild ripple. How long before the wave and how big it will be (tsunami or ripple) NO ONE KNOWS, it could be years (thus I am still searching for the crystal ball). However, the above circumstances have always preceded a turn of home prices in the past.

In search of a crystal ball . . . .

[partypup]

“1. The pending sales can’t guarantee that all houses will be closed. The fell out subprime and the sentiment of buyers (changing their mind) may affect the percentage of houses being closed.”

Excellent point. Care to guess how many “pending” buyers (especially subprime, but maybe even Alt-A) will find they have been locked out of loans when they discover their favorite lender is out of business or in the process of shuttering its doors?

That Wall Street is creaming over this feeble morsel of “good” news is just a sign of how pathetic and desperate they have become. Thsi isn’t a dead cat bounce; it’s a dead elephant roll.

[privatebanker]

This announcement was hilarious. This pending sales report only includes 20% of all signed contracts. How can you make an accurate assumption of what’s going on out there with such a small specimen of information. How was this good news when the Y-O-Y numbers show the index down 8.5%? THe NAR is trying to pull out all the stops aren’t they.

[(former)FormerSanDiegan]

I am with Rotted Oak on this one. The difference is within the noise.

Too much is being made (on this board and in the media) about a 0.7% move in a measure that typically varies by about 1.2%.

I would consider this virtually no movement. If it were 0.7% in the opposite direction I would have the same opinion.

[LA_Renter]

I found this article to put things in proper context.

“The typically short memories of the markets have already put the US sub-prime meltdown behind them.

It’s as if investors think that, because the roof hasn’t caved in on the entire sector yet – despite some high profile casualties – it never will.

And a rise in pending home sales in the US in February had the optimists out in force yesterday, driving the Dow Jones up 128 points to close at 12,510, a five-week high.

So is all right with the world again?

The National Association of Realtors said that pending US home sales rose 0.7% in February, helping to drive the Dow Jones index to a triple-digit gain.

But investors would do well to remember that pending sales are still down 8.5% on last year. And more importantly, even the NAR admitted that sales might be experiencing “some fallout from a decline in subprime lending.”

As one analyst quoted on Markwatch argued, investors are clutching at straws. “Pending home sales data, when did that become a market moving piece of information?” said Eliot Spar of Ryan Beck & Co. “When the market is range bound, it doesn’t take much to move traders off the fence as they extrpolate one data point into a trend.” In other words, one swallow doesn’t make spring – and there’s plenty of other news to suggest the sub-prime debacle is far from over.”

http://www.moneyweek.com/file/27826/is-the-us-housing-slump-coming-to-an-end.html

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