Pending Home Sales Show Surprising Increase

Yesterday, the National Association of Realtors (NAR) released their Pending Home Sales Report for May showing a 6.7% year-over-year increase in pending home sales nationally but a surprisingly weak 0.7% year-over-year decline in pending sales seen in the heavily foreclosure laden markets of the west region.

Meanwhile, the NAR's chief economist Lawrence Yun continues to set the context by which the NAR (or specifically RPAC, their political action committee…) lobbies Congress for more lenient (and likely fraudulent) rules governing the home appraisal process.

“Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

The following chart shows the national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Look at the May seasonally adjusted pending home sales results and draw your own conclusion:

• Nationally the index increased 6.7% as compared to May 2008.
• The Northeast region increased 6.8% as compared to May 2008.
• The Midwest region increased 11.4% as compared to May 2008.
• The South region increased 7.9% as compared to May 2008.
• The West region increased 0.8% as compared to May 2008.

Comments

[Cold Reality:]

And what is a "Pending Sale"?

It is nothing more than a rumor of a potential transaction--similar to a future roulette win--started by a real estate agent. Classic "counting chickens before they hatch."

Why this is even accorded the status of a statistic is beyond belief. It is but one more tool to create an illusion of sales that do not exist. For in fact no sale can be considered as such until it closes and many of them never do.

And the statistics as they portray them are bogus on their face. A "Pending Sale" in April may still be a "Pending Sale" in May, unless you are taking it on faith that the real estate agents will keep this all straight. Similarly, a "Pending Sale" in April that failed and did not close in May and is back again in June as another "Pending Sale". Meaningless.

In a sea of problematic and often specious statistics, this one may be the most disingenuous of them all.

Jul 02 03:36 PM

[billddrummer:]

Pendings shmendings!

Pending sales aren't closed sales. And with the number of distressed sales in progress, pending sales can be pending for months.

A typical short sale can take 6-9 months after you first contact the lender. But it can take 2 to 3 months just to find out who the lender is, particularly if the loan is older than 2 or 3 years.

So realtors who handle short sales will show a 'pending' sale when the bank has received its first offer from the seller. If the bank ignores the offer, counters in a month or more, or collects additional offers before responding to the first, the first realtor still shows the sale as 'pending.'

Multiple offers can also generate multiple pending sales, if the agents aren't working together.

In my example above, if another buyer engages a realtor on the same property, the property generates another 'pending' sale if that realtor writes up an offer for the bank. Voila! Two pending sales on one property, neither of which may ultimately close.

I agree with Cold Reality: Pendings are meaningless. Only closings count.

Jul 03 01:21 AM

[billddrummer:]

Cetin should be banned from this site. It's a shame that he uses some sort of dynamic IP address that you can't block out.

Jul 05 02:25 AM