Data Shows Down Month for Home Sales

In a new report released by the National Association of Realtors, pending home sales were down 2.8% in January. Traditionally these figures have been seen as a reliable …

In a new report released by the National Association of Realtors, pending home sales were down 2.8% in January. Traditionally these figures have been seen as a reliable indicator of future home sales. See the following article from The Street for more on this.

Pending home sales fell 2.8% in January, according to a National Association of Realtors report released Monday morning.

An index that measures the number of contracts to buy previously owned homes in the U.S. fell 2.8% in January month-over-month to a reading of 88.9, from a downwardly revised 91.5 in December. The figure remained 20.6% below the cyclical low last June.

Economists had expected the figure to fall 3.2% after pending home sales rebounded 2% in December, and jumped 3.5% in November.

Pending home sales are viewed as an indicator of future home sales since they reflect contracts — not closings — and generally occur with a lag time of one to two months.

"The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market," said NAR chief economist Lawrence Yun.

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"While home buyers over the past two years have been exceptionally successful with historically low default rates, there is still an elevated level of shadow inventory of distressed homes from past lending mistakes that need to go through the system," Yun said. "We should not expect the recovery to be in a straight upward path – it will zig-zag at times."

"The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market," said NAR chief economist Lawrence Yun.

"While home buyers over the past two years have been exceptionally successful with historically low default rates, there is still an elevated level of shadow inventory of distressed homes from past lending mistakes that need to go through the system," Yun said. "We should not expect the recovery to be in a straight upward path – it will zig-zag at times."

The homebuilder sector has been improving but remains well off a late-spring peak last year when buyers were rushing to take advantage of federal tax credits for homebuyers, and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag.

"The broad fundamentals for a housing recovery are developing," Yun said. "Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market. Some buyers may be looking to real estate as a hedge against potential future inflation."

The SPDR S&P Homebuilders (XHB), an exchange-traded fund that tracks the homebuilder sector, remains around 60% off its peak of $46.08 in early 2006. The iShares Dow Jones US Home Construction (ITB) ETF remains more than 70% off its peak of $50.10 in the spring of 2006.

Among individual builders, Lennar (LEN) rose 1.1% Monday morning, Toll Brothers (TOL) added 0.8%, PulteGroup (PHM) 0.9%, D.R. Horton (DHI) 0.7% and KB Home (KBH) 0.5%.

This article has been republished from The Street. You can also view this article at The Street, a site covering financial news, commentary, analysis, ratings, business and investment content.

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