Posted by Jonathan J. Miller -Friday, April 29, 2011, 11:30 AM
NAR’s March 2011 Pending Home Sale Index was released and touted as having (obviously) good results.
….a forward-looking indicator based on contract signings, rose 5.1 percent to 94.1 in March from a downwardly revised 89.5 in February. The index is 11.4 percent below 106.2 in March 2010; however, activity was at elevated levels in March and April of 2010 to meet the contract deadline for the home buyer tax credit.
[ongoing correction-pet peeve: it is NOT forward looking, it is current looking. Forward only in the context of closings which lag]
In reality the pending home sale index, because of last year’s tex credit skew, should use the non-seasonally adjusted results. Last year at this time the sales were wildly skewed higher than they should (red line). Later this year NAR will likely have to grapple with declining sales caused by last year’s wild skew downward.
The sharp jump in the M-O-M number is more about returning to a more reasonable level of activity than suggesting some sort of boom. The exaggerated jump was because sales in the second half of the year were artificially low (artificially high in the first half of the year.
The pending home sales indices I created for Washington, DC and Baltimore cover the same period but were release 18 days before the NAR report and show the same phenomenon.
Pending Home Sale Index March 2011 Press Release [NAR]
Pending Home Sale Index March 2011 Chart [NAR]
Pending Home Sales Index Baltimore Metro Area [RBI]
Pending Home Sales Index Washington, DC Metro Area [RBI]