Housing Perspective: November Pending Home Sales
By ANDREW JEFFERY
It should come as no surprise that with headlines screaming financial Armageddon and the stock market making new lows seemingly every day, last November wasn’t exactly a great month for the housing market.
This morning, the National Association of Realtors, or NAR, released its Pending Home Sales Index, which measures signed contracts that are expected to turn into sales. The data were abysmal, showing a 4% decline month-over-month to a reading of 82.3, the worst since the data has been tracked. Unsurprisingly, economists — who have been squarely behind the curve at each step of the ongoing financial crisis — expected a mere 1% drop, despite widespread turmoil in financial markets during both October and November.
Yet even with the continued slide in home prices, our good friends over at the NAR are optimistic for 2009 (Ahh to be a lobbyist and completely detached from any shred of reality). This outlook should come as no surprise, as the group has been wearing rose colored glasses since the housing downturn began in late 2005.
To counteract the negativity in their Pending Home Sales Index — which is inconveniently based on actual data rather than farcical forecasting — the NAR also released a report today predicting home prices will be flat in 2009. It even went so far as to forecast an increase in the median price of new homes.
The prediction displays the sheer audacity of a group whose very existence relies on convincing buyers its a great time to buy, irrespective of actual market conditions.
Despite an increase in buying activity in certain distressed markets, home prices are falling, and will continue to fall until supply and demand become rebalanced. This will not happen as long as homebuilders keep building, companies keep laying off employees and banks keep tightening lending guidelines.
And while it’s certainly beating a dead horse to say the decline in home prices will persist, sometimes the horse needs to be beaten.
Too many prospective buyers, eager to jump on attractive deals, will step in too early and be underwater (owing more on their house than it’s worth) almost immediately after the receive their new keys. This unenviable position traps a homeowner, making a job loss or other economic misfortune that much more dire.
There will be more than ample opportunities to buy houses on the cheap when prices have stabilized, and prudent buyers should continue to wait, save their pennies and let others, bolder yet perhaps less wise, catch the falling knife.