Economists are crowing over a huge and unexpected spike in pending home sales. The Econoday consensus estimate was a rebound of 2.4% following the 2.8% decline in January. Instead, the index spiked 5.5%.
Major improvement can be expected for existing home sales in the March to April period based on February’s pending home sales index which jumped 5.5 percent to 112.3. This is well beyond the Econoday consensus which was already calling for a sizable 2.4 percent gain. This index tracks initial contract signings and though winter months are always volatile due to seasonality and related adjustments, today’s results will raise expectations for spring momentum in the housing sector.
Still, the year-on-year rate for this index, at only plus 2.6 percent, is a reminder that the resale market, though at its highs for the economic cycle, is still struggling. Regional data show special February strength in the Midwest, up 11.4 percent, followed by low-to-mid single digit gains across other regions.
Seasonal Adjustments In Play
With such wild swings every month, one has to question the accuracy of the seasonal adjustments. Then again, the weather has no exactly been following normal patterns.
Warmest February in Decades
Mortgage News Daily reports Second Best Month in 11 Years for Pending Home Sales.
Pending home sales in February surprised everyone with an unexpected jump of 5.5 percent. The National Association of Realtors® said its Pending Home Sales Index, which is a leading indicator based on signed home purchase contracts, rose to 112.3 in February from 106.4 in January. The reading is 2.6 percent above a year earlier, and surpassed index readings for every month since May 2006 with the exception of last April.
Lackluster pending home sales in recent months have worried the housing industry, indicating that the spring market might be less successful than hoped. Analysts had expected pending sales to recover from their 2.8 percent downturn in January, but they undershot the market in their estimates for February. Those polled by Econoday had been looking for an increase ranging from 1.4 to 3.5 percent, with a consensus of 2.4 percent.
Lawrence Yun, NAR chief economist, says the level of contract activity in February is proof that, with spring on the doorstep, demand is rising “Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,” he said. “The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.”
Added Yun, “Last month being the warmest February in decades also played a role in kick-starting prospective buyers’ house hunt.”
March could be interesting.
Mike “Mish” Shedlock
I am positive the NAR has no conflict of interest here…..
… and real estate always goes up (don’t look at data before 2010… pay no attention to that man behind the curtain).
“Regional data show special February strength in the Midwest, up 11.4 percent”
Maybe they are selling homes in Illinois to escape escalating taxes, and buying homes in Indiana and neighboring states. In which case, this is more akin to churn, and not a sign of consumer strength. How much Illinois churn is reflected in national statistics? Could it account for the entire gain?
So signings that would have occurred in March occurred in February instead. My guess is we’ll a record collapse of pending home sales in the warmest April in decades.
Could be correlated to reported rising consumer confidence. Nothing can give you better feeling than sitting a new house which you cannot afford, and is backed by the full credit of the taxpayer.
Could it be folks see the value of their funny bucks being eroded, as usual, only at an accelerating pace, and are leaning toward tangibles as a means of preserving wealth?
And some, I would suspect, are realizing renting is a not a good investment strategy. Rent receipts don’t appreciate much over time. (Good for the landlord, though, as he adjusts his income to the cost of living).
Again, three steps forward, one step back.
Commodities, Real Estate and Collectables for the long haul. Add a dash of dividend paying Blue Chips and let the Fed destroy the buck,,,which it is intent on doing whether we like it or not.
A little anecdote,,,, when my dad purchased a little house in a California coastal town back in 1963 for $10,000, people called him crazy for paying that much. He’s gone now, and the house was sold, but today that old house is worth around $700,000. Think it’ll drop back to $10,000? Didn’t think so.
About the only way I can see all this crashing down is, if the Fed decides to sabotage The Donald’s swamp draining efforts, and decides to drain him. It’s a big ol’ club, with tentacles stretched far and wide. Something tells me it will be around a while longer, likely even after cash is gone.
Regulations drove that up. Retaining wall in 49 states, 10,000; Cornyfornia, 10 million.
… an unexpected jump of 5.5 percent. Check back again in the summer when sales drop because people bought earlier than expected.
It could also be the “wealth effect” of a record high stock market.