HousingWire warns about being led astray by negative headlines. Instead, focus on specific data to gauge housing market activity and how it relates to the overall market. For example, the pending home sales index experienced its worst numbers of the past century back in April, and two months ago were some of the best numbers. Just last month, pending home sales pulled back slightly. HousingWire says these changes led to many claiming there were “cracks” in the housing market, but year over year pending home sales remain high. Existing home sales remained fairly neutral compared to the index’s real top and bottom, both in 2005 and 2008, respectively.
New home sales data has been wild this year. This data line went parabolic, and it almost never goes parabolic. The most recent report had a miss on the headline number and negative revision. However, both of these data lines in the last report are still trending higher than I thought. So, once again, this isn’t the moderation I’m looking for. When looking at this metric, the key takeaway is that big moves, either up or down, tend to get revised back toward trend.
How does one tell when a downward trend in the data is a real sign of a weakening housing market?
Two factors are in our favor. First, we’ve been there before, so we know what to look for, and second, it’s not that complicated. We just need to consider both sides of the housing market – new and existing home sales.