Pending home sales were up in August; NAR lowers their price forecast yet again

The Pending Home Sales Index for contracts signed in August 2008 on a seasonally adjusted basis was at 93.4 up 7.36% from August 2008 and also up 8.86% compared to August 2007's figure of 85.8.

Without seasonal adjustments, the index was up 4.97% compared to August 2008. 2001 was previously the slowest year for pending home sales on record. August 2008 was 6.57% below August 2001's sales pace. July 2008 was 12.77% below the 2001 level.

The increases in pending sales was mostly due to a large increase in the West. Seasonally adjusted the West saw an increase of 18.4% month over month and 37.8% year over year. The rest of the regions averaged an increase of 4.8% month over month and 2.2% year over year. This is due to a large decrease in home prices in the West in August. Median home prices in the West dropped from $282,000 in July to $251,600 in August, a drop of 10.8% month over month. The rest of the country averaged a drop of 0.9% in August month over month.

It appears the housing cycle may be moving from a period of declining sales and declining prices to one of increasing sales with declining prices. According to Lawrence Yun, NAR chief economist, said “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region." He says "It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.” Pending home sales in August were entered into before the credit crisis erupted in September.

The NAR made a downward adjustment in their median home sales price forecast for 2008 from $203,600 to $200,700. The NAR is forecasting 2009 median home sales prices to be at $206,300 (versus their projection last month of $208,500 and their projection in August of $215,800 for 2009). In June they had dropped their 2008 forecast by 4.1% from $213,700 to $205,000. We are now entering into a period where pending home sales slow down dramatically. The credit crisis isn't helping things either.

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