Why it's useless? Well, I felt it contradicts new home sales too much that one of them must be wrong - but I don't really understand why it is so wrong.
Pending home sales has many flaws, but at the moment it is particularly problematic because an unknown number of unsuspecting would-be buyers are going to find themselves unable to qualify for a mortgage.
I couldn't believe the commentator on AP (Fort Pitt) who said higher pending sales mean "people are getting mortgages." That is exactly what it doesn't mean.
If you're going to fling biases, I could point out a few:
Anchoring on irrelevant data. CR rightly through this anomalous data out. If other data correlates to it, it gains relevance and credibility. The market is so desperate, so wanting to hear any positive housing news it jumps 2% at the mere hint of it.
The contrast effect. Information that is different carries a higher weight.
Sit tight, see if there is more than one news item based on specious data that shows up; and adjust worldview accordingly.
Well, I spoke too soon as I did find a few instances in the archives. Although it doesn't look like he has covered it recently, so maybe there is a reason for that.
A home sale is pending when the contract has been signed but the transaction has not closed. Pending sales typically close within one or two months of signing.
One or two months is a lot of time for things to go wrong if lending standards continue to tighten and defaults get worse.
However, it's important to keep in mind that even if existing home sales did increase by 1% it wouldn't really count for much if inventory increased more than that - the market would still be deteriorating, downward pressure on prices would still be increasing, more consumer wealth would still be destroyed, mewing would still have to be curtailed further, housing starts would still have to drop further, and even more mortgage lenders would run screaming like Godzilla just walked into downtown Tokyo.
In my home town inventory is up another 12% in the past month.
If home sales increase 1% next month were screwed.
The hysteria prone drama bears see an economic meltdown that will lead to Zimbabwe-style hyperinflation followed by martial law, soup kitchens, grapes of wrath, dust bowl, 1929, Tobacco Road, and nationwide Love Canal conditions.
What else is new?
The usual subculture of the food chain wont be participating in the coming profitfest debauchery.
I love reading meticulously reasoned and uber-graphed proof why the earth should be rotating in the opposite direction. I believe the term is articulate incompetent, isnt it?
Im sorry to hear America isnt working out for you. I hear the weather in Havana is nice this time of year.
The point is, as much as I like this blog, it does tend very heavily towards confirmation bias. Data that doesn't support a bearish position is either totally ignored or explained away to fit the bearish story, but bearish data is taken as gospel.
The simple fact is that the home sales numbers today were better than expected, and that caused a change in the market in general, and homebuilder stocks in particular. Like it or not, whatever your expectations were before, after today, they should be a little better.
Hi Capitalist Pig; see you again next time the market rallies.
Dryfly, you've smitten the nail upon its crux. Until the saving rate turns positive, it'll require something spectacular to get me out of my "bond cave", as it were.
What do you expect to happen in February versus January. The housing pending data is worthless. Of course sales are going to increase in February versus January. That is what naturally happens in the housing market. What is more telling is the YoY change.
Like it or not, whatever your expectations were before, after today, they should be a little better.
"Expectations?"
It's one freaking month that was 0.7% better than last month and 8.5% worse than same month last year.
The trend hasn't changed. The MOM change is as likely to be noise as it is 'signal'. If every single month for the next 12 months has that same gain (0.7%) we'll be back to where we were a year ago (8.5%).
And I can't help what 'they' expect...
I mean if it were reversed... 0.7% worse than last month and 8.5% better than last year and expectations were 'dashed' would YOU be bummed? I wouldn't - I'd say so what, look at the numbers & trend over all - its up a bunch, eight plus percent!!!
I don't worship analysts. Didn't in dotbomb, don't now.
Until we start seeing the YOY changes shrink toward zero & MOM consistently climbing - then we'll know its getting better.
I get your point about confirmation bias, but so what? This blog is just one voice in the blogosphere. There are plenty of other viewpoints that we all receive from the internet, tv, radio etc to balance. If CR was a self contained universe and was our only source of info, I would share your concern.
Also, "Like it or not, whatever your expectations were before, after today, they should be a little better."
Well, my expectation was that March is almost always better than Feb and so a .07% increase does not mean much to me. In fact I feel little worse.
High five for deep-sixing haloscan CR! -thank you (and for NARly analysis)
Why it's useless? Well, I felt it contradicts new home sales too much that one of them must be wrong - but I don't really understand why it is so wrong.
Pending home sales has many flaws, but at the moment it is particularly problematic because an unknown number of unsuspecting would-be buyers are going to find themselves unable to qualify for a mortgage.
I couldn't believe the commentator on AP (Fort Pitt) who said higher pending sales mean "people are getting mortgages." That is exactly what it doesn't mean.
The stock market went up 120 points on the pending home sales.
That is the definition of truth. Isn't it?
The euro fell.
That is the definition of...
Well, I'm not sure what that is the definition of.
Yeah, that news that caused homebuilding stocks to rise 1-2% today after they'd been getting hammered for a few weeks is worthless.
And you don't have any problems with confirmation bias.
Keith,
If you're going to fling biases, I could point out a few:
Sit tight, see if there is more than one news item based on specious data that shows up; and adjust worldview accordingly.
threw.. threw. Typo.
Look foward to the new Layout...
For the record, I don't believe CR has ever covered the pending home sales report.
Well, I spoke too soon as I did find a few instances in the archives. Although it doesn't look like he has covered it recently, so maybe there is a reason for that.
While I was searching, I found an interesting comments pages from this post.
Check it out. The "consumer is dead" arguments are still the same one year later.
Check it out. The "consumer is dead" arguments are still the same one year later.
The consumer isn't dead as long as Visa and Master Card live...
A home sale is pending when the contract has been signed but the transaction has not closed. Pending sales typically close within one or two months of signing.
One or two months is a lot of time for things to go wrong if lending standards continue to tighten and defaults get worse.
However, it's important to keep in mind that even if existing home sales did increase by 1% it wouldn't really count for much if inventory increased more than that - the market would still be deteriorating, downward pressure on prices would still be increasing, more consumer wealth would still be destroyed, mewing would still have to be curtailed further, housing starts would still have to drop further, and even more mortgage lenders would run screaming like Godzilla just walked into downtown Tokyo.
In my home town inventory is up another 12% in the past month.
If home sales increase 1% next month were screwed.
Sit tight, see if there is more than one news item based on specious data that shows up; and adjust worldview accordingly.
That's a pretty good way to look at all kinds of data.
The consumer isn't dead as long as Visa and Master Card live...
Things like steady job growth and increasing real wages no longer matter? I guess it really is different this time.
They do, Steve. But where is there steady job growth and real wage growth?
Not here in the land of E Pluribus Unum.
Things like steady job growth and increasing real wages no longer matter? I guess it really is different this time.
Steve ever consider the negative savings rate that has been with us for a few years now? Why do you suppose that is?
Think maybe a few consumers are spending a wee bit more than their 'steadily growing income' is providing?
Whether provided by MEW or Visa... its debt growth all the same. Consumption based on a negative savings rate isn't a lot to cheer about.
The hysteria prone drama bears see an economic meltdown that will lead to Zimbabwe-style hyperinflation followed by martial law, soup kitchens, grapes of wrath, dust bowl, 1929, Tobacco Road, and nationwide Love Canal conditions.
What else is new?
The usual subculture of the food chain wont be participating in the coming profitfest debauchery.
I love reading meticulously reasoned and uber-graphed proof why the earth should be rotating in the opposite direction. I believe the term is articulate incompetent, isnt it?
Im sorry to hear America isnt working out for you. I hear the weather in Havana is nice this time of year.
But before you go, pull my finger.
Aaaaaahhhhhhhhhhhhhhhhh!
The point is, as much as I like this blog, it does tend very heavily towards confirmation bias. Data that doesn't support a bearish position is either totally ignored or explained away to fit the bearish story, but bearish data is taken as gospel.
The simple fact is that the home sales numbers today were better than expected, and that caused a change in the market in general, and homebuilder stocks in particular. Like it or not, whatever your expectations were before, after today, they should be a little better.
Hi Capitalist Pig; see you again next time the market rallies.
Dryfly, you've smitten the nail upon its crux. Until the saving rate turns positive, it'll require something spectacular to get me out of my "bond cave", as it were.
What do you expect to happen in February versus January. The housing pending data is worthless. Of course sales are going to increase in February versus January. That is what naturally happens in the housing market. What is more telling is the YoY change.
That I believe is....
NEGATIVE.
Like it or not, whatever your expectations were before, after today, they should be a little better.
"Expectations?"
It's one freaking month that was 0.7% better than last month and 8.5% worse than same month last year.
The trend hasn't changed. The MOM change is as likely to be noise as it is 'signal'. If every single month for the next 12 months has that same gain (0.7%) we'll be back to where we were a year ago (8.5%).
And I can't help what 'they' expect...
I mean if it were reversed... 0.7% worse than last month and 8.5% better than last year and expectations were 'dashed' would YOU be bummed? I wouldn't - I'd say so what, look at the numbers & trend over all - its up a bunch, eight plus percent!!!
I don't worship analysts. Didn't in dotbomb, don't now.
Until we start seeing the YOY changes shrink toward zero & MOM consistently climbing - then we'll know its getting better.
Keith,
I get your point about confirmation bias, but so what? This blog is just one voice in the blogosphere. There are plenty of other viewpoints that we all receive from the internet, tv, radio etc to balance. If CR was a self contained universe and was our only source of info, I would share your concern.
Also, "Like it or not, whatever your expectations were before, after today, they should be a little better."
Well, my expectation was that March is almost always better than Feb and so a .07% increase does not mean much to me. In fact I feel little worse.