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Seasonally Adjusted (SA) Data
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Washington, January 27, 2011
Pending home sales improved further in December, marking the fifth gain in the past six months, according to the National Association of Realtors®
The Pending Home Sales Index,* a forward-looking indicator, increased 2.0 percent to 93.7 based on contracts signed in December from a downwardly revised 91.9 in November. The index is 4.2 percent below the 97.8 mark in December 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, credits good affordability conditions and economic improvement. “Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions. Mortgage rates should rise only modestly in the months ahead, so we’ll continue to see a favorable environment for buyers with good credit,” he said.
“In the past two years, home buyers have been very successful, with super-low loan default rates, partly because of stable home prices during that time. That trend is likely to continue in 2011 as long as there is sufficient demand to absorb inventory,” Yun said. “The latest pending sales gain suggests activity is very close to a sustainable, healthy volume of a mid-5 million total annual home sales. However, sales above 6 million, as occurred during the bubble years, is highly unlikely this year.”
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.
Vigilant Grandpa on NAR's Real Figures
(a.k.a. Not Seasonally Adjusted)The National Association of Realtors headline, seasonally adjusted December 2010 index number was 93.7 and 2% greater than November. The Not Seasonally Adjusted (NSA) Index was 60.9 or 35% less than the smoke and mirrors headline number. In addition, the December 2010 NAS figure decreased 19.8% from November.
By region, NAR reported an increase of 11.5% month over month for the SA South Region however the NSA figure was -7.5%. They reported a -13.2% reduction month over month when in fact the non pretend and non-manipulated figure was -34.3% month over month.
Lawrence Yun starting his Santa Claus impersonation in November when he reported a 91.9 SA pending home index while the NSA figure was 75.9 (17% less). This enabled the jolly one to report a 3% increase month over month while the Grinch, NSA figure was in fact -9.6 month over month.
Santa Claus' seasonally adjusted monthly figures indicate 3 consecutive months (Oct., Nov. & Dec. 2010) of increasing pending home sales when in fact the NSA figures show 3 consectutive months of declines!
Come on Santa, time to come clean as we never bought that entire "down the chimney" thing Either!