SoCalsurfbum

Pending Home Sales Up: Does That Mean Anything?

"Pending Home Sales Index, based on contracts signed in March, rose 3.2 percent"...

The more I see stuff like this, the more I realize the market is not paying attention and takes everything at face value.

This is a bogus number. Of course pending home sales are higher in March than in February... this has happened since housing records have been kept... it is called seasonality.

Let me make a prediction and I would love to bet anyone on this, April pendings will be higher than March. Dec.-Feb. are the slowest sales months every year, March picks up a bit... April is when the spring selling season really gets ramped up and lasts through July, then slowly falls off.

Seasonality doesn't make a housing recovery. By the way the real number is a 1.1% increase in pendings vs. 2008 and as was mentioned earlier, a pending does not mean a closing.

Back when the market was good, our close rate on pendings was about 75-85%... I can only imagine how many pendings will fall through in this market. Between difficult financing conditions, required down payments, getting short sale approvals and the inability to unload the old house at an acceptable price (which is probably the largest impediment) will make for either very long escrows or sales that just don't close.

What is happening now is not what a market bottom in housing looks like. People have a very short memory when it comes to history.

Which Is the Best Home Price Index?

Just a quick note:

OFHEO information comes from Fannie / Freddie and because of this it only tracks homes that are within it's "conforming loan" limit... which was up until a little while ago only $400k+.

This basically eliminates a lot of California, New York and several other important markets whose median price is well above that limit. This could be part of the variance you see...

"Look at your data"... agreed. I would add to that know exactly how that data is captured and analyzed.