More Good New, just Maybe

A real estate report said Tuesday, that Pending Home Sales ticked higher for December 2008.  For a quick clarification, a “pending home sale” is a home under contract but not yet closed.

The report positions Pending Home Sales report is a predictor of future activity, suggesting that home sales will spike 60 days or so.

Yes, Indiana,  this is good news for the economy.

However,the Pending Home Sales report in correlation to the actual number of homes that are sold, the connection may not be the report’s best use, and this is becasue of what Pending Homes Sales report does not measure.

Specifically not included in Pending Homes Sales are:

1. Sales of new construction homes
2. Sales of For Sale By Owner homes
3. 80% of non-surveyed MLS transactions

And, it should be noted that Pending Home Sales tracks contracts and not closings, and until a home is sold and closed, nothing has really has happened in the economy.  That’s especially relevant in this market in which finding financing isn’t always so easy.

The Pending Home Sales report still has a good use, though, because it’s a fantastic look at the buy-side demand for Indiana homes. Clearly, low mortgage rates and declining home prices are having an impact and this is why the December’s Pending Home Sales report is so important.  It’s the third housing report this month that shows the demand for homes rising while the supply of homes falls.

The other two reports:

1. The number of “used” homes sold monthly is rising
2. The number of new homes being built are falling

This is good news for home sellers and for the economy. If housing is expected to lead the U.S. out of recession, the seeds for that recovery may have already been planted.

Now, we just have to watch out for “Porky the Stimulus Pig”, which I believe will cause much harm to the economy in 1.5 to 2 years.