Sunday, July 12, 2009

Pending home sales are an unreliable indicator

The Wall Street Journal says not to trust pending home sales as an indicator of actual future sales.
The National Association of Realtors is trumpeting a fourth consecutive monthly gain in their report of pending home sales. The index tracks the number of contracts signed on homes...

In the past those contracts would give a pretty good indication of what existing home sales would look like when the NAR reports its [sales] numbers a few weeks later. These days the report’s reliability as an indicator is shakier. More pending sales appear to be falling through, as financing becomes harder to reach or as buyers and sellers renege on pricing. ...

Indeed, for nearly a year, the pending home-sales index appears to be over-predicting closed sales relative to historical levels, notes independent housing economist Thomas Lawler.

4 comments:

  1. "More pending sales appear to be falling through, as financing becomes harder to reach or as buyers and sellers renege on pricing"

    Not even mentioning all the short sales that the banks take years to approve....and by then the prices have cut in half and the buyer doesnt want it anymore!

    If people just faced reality.

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  2. House prices are sooo overblown EVERYWHERE in the world. There used to be places where you could quite happily retire with bit of a cash - not any more.

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  3. I dont know man, you can still move to eastern european and south east asian countries and retire with a few bucks. The world is a pretty BIG place.

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  4. We are being led to believe that the house price roller-coaster is over and housing is becoming cheaper. That may be the case in many areas but it still doesn't mean hat the banks are lending on these cheaper prices, infact the opposite as they fear their investment in your house will fall further.

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