| News Flash! Housing Was Horrible at the End of 2008 |
| Written by Jonathan Smoke | |
| 01.06.2009 | |
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Discuss this article on the forums. (0 posts) Today we received the first of several reports to come over the next few months that won’t tell us much of anything of what is going on now with local housing markets. The national statistics are always a bit misleading, but it will be especially true of trying to drive forward while staring at the rear view mirror filled with housing data from 2008. Today’s national new nugget was the release of the pending home sales index from the National Association of Realtors. While NAR considers the index to be forward looking in that it is a good predictor of what November and December existing home sales will actually be, given the nuances of how 2008 ended and the massive changes in mortgage rates and more federal stimulus on the way, we can't learn much about tomorrow based on what happened last November. NAR reported that “[a]fter holding fairly stable for a year, pending home sales declined in the face of job losses and an eroding economy.” The national seasonally adjusted index declined 4% to 82.3 from a downwardly revised reading of 85.7 in October, the lowest reading in the series history, which began in 2001. It was 5.3% below November 2007’s reading of 86.9. Even NAR’s press release pointed to the irrelevancy of the November reading for determining what will happen: Lawrence Yun, NAR chief economist, said a weakening was inevitable. “Mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November,” he said. “December’s housing market activity could be comparably lower due to ongoing problems in the economy, so a real estate-focused stimulus plan is urgently needed.”
Yun said the outlook will depend heavily on the stimulus package. “With a proper real-estate focused stimulus measure, home sales could rise more than expected, by more than 10 percent to 5.5 million in 2009, and easily begin to stabilize home prices in many parts of the country. Stable home prices will, in turn, lessen foreclosure pressures and lay the foundations for a solid economic recovery as the nation’s 75 million homeowners regain confidence,” he said. The impact of mortgage interest rates declining to near 50-year lows in December is not reflected in current data. As the chart above illustrates, every market declined in November—another news flash!—but it is key to note that the level of seasonally adjusted home sales in November was still above the 2000 benchmark rate in the West. The South had the smallest decline of 2.2%, while the West only experienced a slightly higher decline of 2.4%. With prices down, mortgage rates at historic lows, and some form of stimulus around the corner, we can expect these figures to improve before the end of this quarter, but using such lagged information it will take us until April or May to determine if conditions are really improving. 
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