No, Pending Home Sales Index Did Not Rise
"The worst part of the credit crunch" is already reflected in the data, said Lawrence Yun, chief economist for the NAR . . . the data suggested the worst declines are over."
-NAR release, December 10, 2007
That is not what their own data suggested. (You can always tell when these folks are lying -- the clue will be their lips are moving).
The trade association is notorious for their ever-sunny forecasts and steadfast denial of the housing bust. The monthly release of the Pending Home Sales Index (PHSI) presents just another opportunity to offer their absurd take on the Housing market. The headline data release yesterday (Existing-Home Sales to Trend up in 2008) along with that absurd quote above reveal no change in their willingness to misrepresent even their own data. Yesterday's spin was "Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise. However, a recovery for new-home sales is unlikely before 2009."
That is a false interpretation of the Index reading, according to the NAR website. Why ? Look at the index itself (see chart), and the NAR's own methodology of how to interpret it.
The PHSI is an index based on a large national sample. The operators of Realtors.com site states this indicator, derived from "about 20 percent of transactions for existing-home sales," is supposed to lead activity in the housing sector over the next few months. The PHSI Index for October 07 showed an 18.4% drop below the year-earlier level, and month-to-month showed a rise of 0.6%.
By emphasizing the monthly data, the NAR chose to ignore their own methodology for interpreting the Index. From the NAR explanation of the methodology of the PHSI:
"In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
In other words, which should we pay attention to: the piddling 0.6% rise in October from the revised September reading, or the 18.4% year-over-year earlier drop? Its the annual data -- and that was quite awful . . .
The NAR continues as a source of amusement. They are instructive as to why news releases from industry spokesgroups need to be fisked very closely.
UPDATE: December 11, 2007 10:22am
See Dan Gross' Slate piece:
Worst. Forecasters. Ever?
Existing-Home Sales to Trend up in 2008
NAR, December 10, 2007 http://www.realtor.org/press_room/news_releases/2007/ehs_dec07_trend_up_2008.html
Pending Home Sales Rise But Remain Below Year-Earlier Level
December 11, 2007; Page A2
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The National Association of Realtors Pending Home Sales Index has been released, and it is once again, an exercise in spin. Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise Over the next few months, existing-home sales are expected ... [Read More]
Tracked on Jan 8, 2008 11:08:08 AM
It's pretty clear from the graph that a change of this size is just noise--over the last 2+ years there have been several small upward blips superimposed on a major downward curve.
Posted by: J | Dec 11, 2007 8:18:19 AM
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