The National Association of Realtors reported today that its index tracking pending home sales jumped a seasonally adjusted 3.7% to read 114.1 in October, marking nine consecutive months of rising sales. Analysts had expected pending home sales to slump by 1%.
National Association of Realtors Chief Economist Lawrence Yun said: “Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6 million annually, but we were well below the 5-million mark before the home buyer tax credit stimulus. This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future. The weak job market remains a major concern and could slow the recovery process.”
The NAR has a vested interest in ‘hyping’ the real estate market by way of ‘spinning’ the numbers to any positive. Those that purchase houses/property at these still inflated prices will get a rude awakening in the not too distant future.
The latest Case-Shiller 20 city index shows a 28.1% price decrease in housing from the market peak. At the bubble peak total housing was valued at about $25 trillion. It is now about $19 trillion. The long (1896-2004) term trend line value pre-bubble was about $13.5 trillion. We are not quite halfway through the house price decline.
Unfortunately, when inflated prices retreat back to their long term trend line, often they overshoot below, taking that much longer to return to normal. Much more pain to come in the housing market.
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Housing bears are making the same mistake now that some housing bulls made back in 2005, believing that their preferred trend will just keep on going. The current rate of home sales has come up to just 15% below the all-time yearly averages in 2005, and it is still growing. Inventories are down to the nearly balanced 6-7 month level and are falling faster than foreclosures are being added. New homes are being built much more slowly than the rate at which they are selling.This has been going on since early spring. Record low mortgage rates and the tax credit will keep adding fuel to the trend right through next summer.
The real risk is that another housing bubble may be starting right now and will swell through 2014.
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It is all government meddling with welfare as its end goal. Will it work out well, give me a break.
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