NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist
INDICATOR: November Pending Home Sales
KEY DATA: Pending Sales Index: 96.0 (down 16.0%)
IN A NUTSHELL: “If you had any questions about the impact of the government’s first time homebuyers’ incentive, all you have to look at is the pending home sales when the program was supposed to be terminated.”
WHAT IT MEANS: Incentives do work. You may agree or disagree with their use, but the when it came to both the housing and the motor vehicle markets, the government’s programs led to a surge in demand. Of course, once the program was ended, you would expect that sales would falter. That is what happened with vehicles as sales jumped in September but fell sharply in October. With home sales, that looks to be happening now as well. We saw housing sales rise sharply in the September through November period and now it appears it will be coming down. The National Association of Realtors’ Pending Home Sales Index cratered in November and that tells us demand should ease over the next couple of months. Still, pending home sales were up over 15% from the November 2008 levels. Potential sales were off by over 25% in both the Northeast and Midwest, by double-digits in the South but more modestly in the West.
MARKETS AND FED POLICY IMPLICATIONS: This was a weak report that should have surprised no one. Indeed, we should expect that when the pressures to buy start building again in the spring as the extended “first time buyers/long time owners” incentive looks like it may disappear, home sales could surge again. Thus, don’t get too worked up over ups and downs in this market. The issue for the housing market in the longer term is the extent of foreclosures, the level of mortgage rates and job growth. The economy is coming along just fine as we saw in the latest factory orders numbers, which were up strongly. But that doesn’t mean payrolls will start being padded and the unemployment rate will come down quickly. Thus, foreclosures will continue and in those areas where distressed homes are a major component of the markets, prices will remain weak. But in the non-bubble-challenged areas, sales and even prices should start to improve as we go through the first half of the year. This week, though, it is all about the December jobs report that will be released on Friday. There is a chance it could be positive but don’t worry if it is not. The data are pointing to a return to payroll gains not losses and which month it occurs doesn’t matter much. What the economist community is arguing about is how strong those increases will be. I worry that they will not be very robust this year.
FROM: CHRISTOPHER J. BROWN, PRESIDENT
THE INFORMATION PROVIDED HEREIN MAY NOT BE THE POINT OF VIEW OF GUARDIAN SETTLEMENT AGENTS, INC.. THIS INFORMATION IS BEING PROVIDED AS INFORMATIONAL ONLY, GUARDIAN SETTLEMENT AGENTS, INC. ITS SUCCESSORS, ASSIGNS, OR AFFILIATES IS NOT SELLING OR IS LICENSED TO SELL SECURITY OR INVESTMENT PRODUCTS. YOU SHOULD CONSULT YOUR LICENSED FINANCIAL CONSULTANT FOR INVESTMENT ADVICE
