Pending Home Sales Index Was Bad - Not Good (as Reported)

by: Barry Ritholtz

There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

-Pending Home Sales Index 

 That's not my definition, that comes straight from the NAR's release. Its the annual changes that matters more.

Not that you would know that reading the spinmeister-in-Chief at the NAR. In what I can only surmise is a foolish attempt at reputation destruction,  Lawrence Yun seems to always emphasize the wrong data. We are left with the assumption that he takes fast track career advice from David Lereah.

Here are the facts: The Pending Home Sales Index is down 12.3%. According to the NAR's statement about the PHSI, that is a negative for the next two months. While their press release emphasizes the 5.3% monthly gain in June, we have demonstrated in the past why that amount to little more than the usual seasonality, as families who are moving try to get into the new homes before the new school year starts.

It's one thing for the NAR flacks to spin it, it's especially disappointing when the media gets it wrong.

In a sign that the U.S. housing market may strengthen in coming months, an index of sales contracts on previously owned U.S. homes rose 5.3% in June from the prior month, the National Association of Realtors reported Thursday.  

No, no, no, no, no!
Doesn't anyone else read the footnotes or methodologies ?
UPDATE2: August 7, 2008 2:41pm
Diana Olick points to this chart (below) from, showing the difference between PHSI and actual closings. This very much supports the annual contention discussed above.



UPDATE: August 7, 2008 12:45pm
Mr. Mortgage says it's even worse than that:  

"Many of the ‘pendings’ are short sales, which will never get approved. As a matter of fact, a study just came out of Santa Clara county, CA showing that between Sept 2007 and the end of March 2008, 2700 short sales were applied for and 77 approved.

How many of today’s ‘pendings’ will never close because the short sale approval does not go through?"  

Revisiting Housing Seasonality & the Perennial Bottom Callers  (July 2008)
Pending Home Sales Rise, Wider Gains Anticipated as Buyers tap Housing Provisions
NAR, August 07, 2008