Monday, May 30, 2011

April pending home sales decline from month earlier and year earlier

April 2011 pending home sales fell 11.6% since March 2011, and 26.5% since April 2010:
The number of people who signed contracts to buy previously occupied homes in the U.S. tumbled last month, the latest sign that the battered sector is struggling to rebound.

The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes decreased 11.6% on a monthly basis to 81.9, the industry group said Friday.

March’s reading was revised down to 92.6 from an original reading of 94.1. ...

The pending sales index was 26.5% below its level in April 2010, which is when a tax subsidy for first-time home buyers expired. ...

A sale is considered pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.

Lawrence Yun, the NAR’s chief economist, said the drop may reflect an economic soft patch in April driven by higher oil prices, severe weather and a bump in unemployment claims.


  1. The double dip feels more and more evident with this kind of news which seems to abound more and more each day.

  2. I definitely agree with you.

  3. So when is the double dip gonna hit DC and bring the prices down to reality??

  4. The price of a 750sf 1 bedroom is still around $350,000.  Crazy!!

  5. Case Schiller numbers are out. February was revised down from 181.33 to 181.01. March was 182.98, only .02 from the 183 prediction by Partisan, who takes month number two of the projection competition (my projection was 180.9). This puts us tied at 1 all. However, sales pairs fell to their lowest ever value ever, 2245. March 1991 was the next lowest for sales pairs at 2433.

    In my opinion, prices are up (4.3%!) because the transactions are taking place at the higher end of the pricing spectrum between folks who are not so price sensitive. I believe sellers are desperately trying to hold out for a rebound, but will either have to move out of the area and rent out their place or take the hit and sell. Seems I see lots of listings on Redfin that have been sitting for a long long time--some appear to be contractors who aren't seeing offers at the price they want from a renovation they've done.

    I'd be interested to hear from anyone who has a place on the market now or knows someone who does. I suspect that person will not be singing the praises of the 4.3% price increase, but will instead scratch their head because they can't get their asking price.

  6. I saw that too JAC.  Yeah, subject of course to subsequent revisions, it now looks we are tied 1-1 with 22 predictions to go. 

    Regarding the # of transactions, can you check and see how many there were around 1996?

    The reason I ask is that if you look at the last bubble bursting/ downturn in NOVA, prices fell in 1991 and 1992 before inching upward (nominally) in 93, 94, 95, etc.  Interestingly enough however, the absolute bottom in realtor transactions was not until 1996! 

    If thats true, then that may be what we are seeing now.  Sellers "holding out" is a natural component of finding a bottom -- basically more and more of them (with the ability to do so) hold out, thereby forming a bottom as inventory dries up.  True, the sellers can only hold out for so long, but when they do return, they do not do so "en masse" driving up inventory levels into the stratosphere like we saw in 2006.  Instead, they return, slowly over time, drip by drip, and only so rapidly as the market can handle without causing nominal prices to fall again. 

    Thats my thought at least.  Again though, can you check on the number of CS transactions in 1996?  My guess is it is not as low as 1991, but clearly lower than 93, 94, 95...

  7. You should definitely rent something, instead, for $2000 grand a month. 

  8. Particularly if the place will be worth $20 or $30 grand less once you want to sell it or decide you want to leave town for that promotion in a different city.

  9. Hm, I think the comparison is a major stretch, the two situations are just so different. As for the numbers, it can be a bad idea to look at the monthly numbers straight up because there is so much cyclicality...I typically look at the 12 month running average...

    But here are the monthly numbers:

    Jan-96    3461
    Feb-96    3106
    Mar-96    2856
    Apr-96    3239
    May-96    4017
    Jun-96    4815
    Jul-96    5332
    Aug-96    5361
    Sep-96    4938
    Oct-96    4377
    Nov-96    3698
    Dec-96    3423

    These are available here:

  10. I dont know if I would call it a "major" stretch.  Its part of what should happen if you think about it logically.  Great example is in the so called immunozones.  For years, people would see the low sales numbers in Arlington and scream that a major CRASH is coming.  They ignored that inventory was declining at an even greater pace, (its hard to beat YOY sales records when you have less and less available to sell) so prices did not plummet there like they did elsewhere.   

    In any event, the main point I am trying to indicate is that low sales is not always an indication of price declines dead ahead.  Thus, given that we are at near record lows of inventory, its no surprise that sales are so few.    

  11. I feel like there is a microeconomics supply curve and demand curve argument in here for me to use....  And further, WHY is inventory at record lows?

    But moreso, just looking at the charts--there's hardly a blip in the period you're talking about versus a huuuuuge bump in the '03-'09 period...for that reason alone I'm thinking that the comparison doesn't seem appropriate. But maybe we're looking at different charts? I'm referring to the Case-Schiller charts for price and sales pairs for DC.

    The real estate bubble seems to be uncharted territory....would be interesting if an economist could look at some monthly numbers like these for real estate bubbles in other countries...

  12. Inventory is at record lows, partly because of sales, but mostly because of stubborn people holding out and refusing to list until a "better time".  This is the normal pattern at the end of downturns, helping to form a bottom. 

    The error is some of the bears to think that as soon as the market firms, those holdouts will return en masse and drive down prices -- they dont. 

    Instead, hold outs return, drip by drip as each one decides individually when its time to try again.  This is a process that has been going on continuously since early 2009... some hold outs return and sell, others dont, and will not for years to come.  Either way, dont expect another inventory spike like we saw in 2007.  Those days are long gone.

    Also, in terms of the appropriateness of comparison.  I agree that the 87-90 blip was just a blip versus the massive bubble of a few years ago.  In terms of apples to apples, yes there is no comparison as this was 1,000 times worse.

    My point instead was that they both represented cycles in the real estate market.  Each had (1) an increase in sales (2) a lack of inventory to match (3) rapidly rising prices (at one point in 1988 going up at over 16% YOY) as supply could not meet demand; (4) a slowdown in sales just as (5) inventory spiked, with (6) prices falling on a real and nominal basis, followed by (7) a large draw down of inventory (mostly due to hold outs) as the market cleared followed by (8) declining sales. 

    Now, to be fair, we do have some differences in that the early 90s cycle ended in price stagnation and this one thus far has ended with a respectable increase in prices.  But otherwise, they are more similar in terms of steps, if not in magnitude. 

    So in a vacuum, I see a drop in sales to be one of two things (a) the first incling of trouble, or (b) the end "hangover" stage of a cycle.  Since we are not in a vacuum, I then look at inventory.  If it was rising, I would think the sales drop is a sign of (a), but given that inventory is at record low, I think a more reasonable interpretation is (b).

  13. Where can I get my hands on the inventory data you're referencing...?

  14. JAC - for contemporary inventory levels, this is a good site

    As far as pre 2000 inventory levels, you used to be able to find that info here:

    Note, this site has undergone a MAJOR renovation in the last year, (back when it was, and since then, I have not been able to find the old inventory data.  My guess is its probably in there, somewhere, if you can find it.  It also used to be located here:

    but it appears it is now password protected.  Finally, on this site, there was an old bear under the handle "Tired Bubble Watcher" who once linked to inventory levels for 20+ years, via the washington post:

    He isnt active anymore, but if you search through his old posts, say in late 2009, early 2010, you may stumble across it.

  15. Here's some more inventory numbers: