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What Do the Pending Home Sale Numbers Mean?

Washington’s Blog [1]
Wednesday, January 6th, 2010

The report [2] released today by the National Association of Realtors (NAR) on pending home sales shows that housing is down:

Associated Press notes [3] that the housing market may be headed for a “double-dip” downturn over the winter, and that the report “adds to worries industry is mostly propped up by government stimulus”.

Remember that pending home sales figures are based on contracts which have been written, but have not yet closed. As NAR notes [4]:

The Pending Home Sales Index [is] a forward-looking indicator based on contracts signed …

NAR explains [5]:

[6]

Given that the big banks have substantially tightened up on lending, it might be that less than 80% of the low number of current pending home sales will end up actually closing.

No wonder the New York Times wrote [7] yesterday, even before the new pending home sales report was released:

When it comes, a lasting recovery will be evident in a housing rebound. Unfortunately, housing appears to be weakening anew …

We wish we could proclaim a Happy New Year in housing. But until more is done to help struggling homeowners, the portents are not good.