Monday, October 4, 2010

Pending Home Sales Index: "Nothing Is But What Is Not..."

(Act 1, Scene 3 Macbeth).   The National Association of Realtors released its montly pending home sales index today.  The headline cheerily reported "another gain."  Here's the link:  Pending Home Sales.  Of course, in taking its cue from Government economic reporting, buried in the cheerleading is that fact that the number originally reported for July was revised lower, as was the case for the June number when July was reported. 

Interestingly the NAR chief economist Lawrence "the glass is overflowing" Yun's comments uncharacteristically reflected some caveats to his effervescent commentary.  If Yun is now hesitatingly shaking his pom-poms, the true conditions of the housing market must be just absolutely horrific. Not to mention the fact that, despite record low mortgage rates, the August 2010 index level is 20% below the level reported for August 2009.  Take away the homebuyer tax credit and introduce a sell-off in the bond market, and the housing market is set up for another cliff dive (nothwistanding the fact that the economy is headed into purgatory and the job market, other than for Government employees, continues to deteriorate).

It is my view that before the housing market ever reaches a true bottom, we are likely to see prices fall at least another 30-40% from where they are now.  I said back in 2002 that I expected ultimately, minimually a 75% decline from peak prices.  That has already occurred in some of the worst bubble markets.  I know that on a case-by-case basis some very high end homes in Denver (Cherry Hills Village) are down in excess of 60%.  The bottom line is that, despite what even some nabobs of negativity like Nouriel Roubini are saying, we still have a long way to go.

On another note, it would be wise for the hoi polloi to start taking their cues from the super-rich:  Super-rich Investors Buy Gold By The Ton


  1. Dave,

    You mentioned Cherry Hills Village in Denver is down 60 percent. So, i guess that's a good place to buy in. do you know of any other "A" grade areas on the west coast that are down 60 percent? ie. san francisco, los angeles, san diego areas.

    Ricky T

  2. ya buy in if you want to watch your investment go down another 30-40% from here.

  3. Dave,

    You might find this post on the CA RE market shadow inventory nightmare interesting. DHB's blog has been spot on thus far:

    Keep up the good work!