From Marketwatch:
Pending home sales rise 4.3% in August
By Rex Nutting
Pending sales of U.S. existing homes rose by 4.3% in August, indicating the housing market may be stabilizing, the National Association of Realtors said Monday.
Pending-home sales are down 14.1% in the past year, the real estate industry group said.“Our sense is that home sales may have reached a low in August,” said David Lereah, chief economist for the NAR in a statement.
“With fewer new listings coming on the market, we should be able to draw down the inventory supply early next year to the point where home prices will rise, but at a slower pace than historic norms,” Lereah said.
The pending-sales index rose 9.2% in the West, 4% in the South and 3.6% in the Northeast. The index was flat in the Midwest.
Sales are recorded as “pending” when a sales contract is signed; they are recorded as “sold” when the sale closes, usually one or two months later.
From the NAR:
From Bloomberg:
U.S. September ISM Manufacturing Index Falls to 52.9 From 54.5
Manufacturing in the U.S. last month expanded less than economists forecast, suggesting the housing slump is extending its reach to other parts of the economy.
The Institute for Supply Management’s manufacturing index dropped to 52.9 from 54.5 in the prior month. A reading higher than 50 signals expansion. The index averaged 55.2 this year through August.
The decrease raises the risk that the economy will slow more than forecast heading into 2007 and shows the Federal Reserve was right in ending two years of interest-rate increases in June. Corporate leaders, whose confidence has been rattled by a weakening real estate market and slower consumer spending, are reluctant to buy new equipment.
“The demand for manufactured products has weakened with slower consumer spending.” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. “Although factory activity is still growing moderately, it is at a slower pace than earlier this year and in 2005.”
From Bloomberg:
U.S. Construction Spending Rose 0.3% in August on Factories
onstruction spending in the U.S. unexpectedly rose in August as companies increased investment in office buildings, factories and hospitals.
Spending rose 0.3 percent following a revised 1.0 percent drop the month before, the Commerce Department said today in Washington.
Corporate spending on new facilities is helping to soften the blow to the economy from the slump in home-building. Sliding home sales and construction are curbing economic growth as consumers find it harder to borrow against the value of their homes to finance spending.
Non-residential construction “does help mitigate some of the drag in residential construction,” Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “However, this is not something that suggests that the trend is changing.”
Economists forecast construction spending would fall 0.3 percent, after an originally reported 1.2 percent drop in July, according to the median of 39 forecasts in a Bloomberg News survey. Estimates ranged from a decline of 1.5 percent to a gain of 0.8 percent.
wonder what lee-iar is going to say when spring rolls around and the inventory hits the market like an avalanche from the usual listings + all those who withdrew or held back listing until a ‘better time’ happens with a shrinking buyer base to target. much of the market is driven by trade up buyers so expect a domino effect as those trade uppers will have to sell existing houses to a buying pool that just isn’t big enough to buy at historical unaffordable levels.
this number is likely overstated due to the high (and rising) rate of cancellations
also it’s suspicious that purchase mortgage apps are down 20% and pending sales only down 14%.
I don’t think it’s necessary to call foul on the numbers, just take a look at the PDF.
This is the second worst figure in the past year.
Dear David,
“It’s only a flesh wound.”
In a previous post I posted this information for September (preliminary). I should have posted August.
As you can see the number of sales declined in August and you have to go back to around 1996 for comparable numbers. For the number under contract (pending) you have to go back to around 2000 for comparable numbers.
For Bergen County ONLY, here are the updated average & median price along with the number of homes sold and number under contract in August for the past 11 years. This is for residential SFH listings; this does NOT include Condos/Co-ops & Townhouses.
Year Avg$ Med$ Sold UnderContract
1995 $268,468 $230,000 539 458*
1996 $275,882 $230,000 726 563
1997 $288,687 $229,900 730 473
1998 $308,420 $245,000 806 539
1999 $344,744 $274,000 838 588
2000 $398,302 $294,900 768 619
2001 $418,846 $335,000 871 627
2002 $471,731 $380,000 838 611
2003 $530,431 $425,000 865 647
2004 $551,580 $469,000 777 664
2005 $669,531 $539,000 933 688
2006 $717,474 $535,000 670 613
Here is the same data as above but including Condos/Co-ops, Townhouses along with SFH.
Year Avg$ Med$ Sold UnderContract
1995 $247,620 $216,000 672 612*
1996 $257,598 $215,000 894 701
1997 $266,817 $215,000 902 617
1998 $282,075 $226,000 1029 736
1999 $310,101 $247,500 1087 779
2000 $352,890 $270,000 1018 891
2001 $380,208 $310,500 1138 862
2002 $424,039 $350,000 1109 844
2003 $479,323 $390,000 1140 895
2004 $494,282 $425,000 1066 973
2005 $597,332 $497,000 1301 986
2006 $635,755 $500,000 909 839
*1995 data may be incomplete as I believe this is the first year this data becomes available.
James, I think these numbers are nothing to celebrate. When August comes in lower than January, there’s no reason to think we are seeing “stabilization”.
Stabilization will occur when inventory stops increasing, and we haven’t seen signs of that yet.
The extremely low numbers in the midwest and northeast indicate that this has become truly national, and that’s not what cheerleaders for a quick resurgence in the housing market want to see.
Time to put on my old editor’s hat:
I understand that this is Nutting’s first draft of the story, but I find it weak that he does not report the YOY decline. All it takes is one line, and it adds perspective.
I hope any future versions of the story also bring up the subject of adjustments. If this is a number that is likely to face some adjustment that’s important to know.
A quick look at an older report shows that there is some adjustment, but it has not been large, though it could easily cut in half the headline’s rise number.
Also, stories like this usually deserve a word of caution from someone regarding the difficulty of making judgements based on a single point of data.
Is there any way to distinguish sales to first time buyers versus existing homeowners?
In other words, are today’s buyers actually absorbing inventory or are they simply swapping one house for another?
Most first time buyers I know are either priced out or have chosen to sit back to “wait and see”. At the same time, I still see a number of existing owners buying. They seem to fall into one of 2 camps:
1) They have a seller’s mentality and are often caught off guard when they buy a house assuming that theirs will sell very quickly and at a good price. This group seems to be making up the last of the “greatest fools”.
2) Owners of low-end houses are consciously taking advantage of the pancake effect (i.e. prices for higher end houses are falling faster than prices for lower end houses, compressing the housing market) in the housing market to trade up.
does anybody have info on last r.e. bust and how inventory decreased at that time
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