Pending Home Sales Fall Short; A Sign of Softness or Something Else?

January 28, 2013 12:39 PM EST
The National Association of Realtors (NAR) today reported an unanticipated decline in pending home sales in December. According to Lawrence Yun, NAR chief economist, supply limitation appears to be the main factor holding back contract signings in the past month. This not likely to be interpreted by the market as a negative. Interestingly, a number of homebuilder stocks are under pressure on Monday, including PulteGroup, Inc. (NYSE: PHM), Lennar (NYSE: LEN), KB Home (NYSE: KBH), and Beazer Homes USA Inc. (NYSE: BZH). This has some investors taking a close look at interest rates.

"Supplies of homes costing less than $100,000 are tight in much of the country, especially in the West, so first-time buyers have fewer options," said Yun. "We expect a seasonal rise of inventory in the spring to help, but a seller's market may be developing. Much of the West is already a seller's market for homes priced under a million dollars, but conditions are much more balanced in the Northeast."

In other words, in Yun's view, the drop in pending home sales is bullish for housing. Presumably, it is also be bullish for homebuilders, as shoppers must now turn to new homes given tight supply in the market for existing homes.

In order to understand today's drop in homebuilders, investors are taking a look at bond-rates. For the first time in months, yields on the 10-year U.S. treasuries closed the gap on 2 percent, topping out at 1.99 percent. Yields on 30-year treasures also climbed today, gained 1 percent and tapping multi-month highs at 3.17 percent. This is likely to translate into higher borrowing costs and mortgage rates, which might in turn put downward pressure on buying interest.

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

ETFs, Economic Data

Related Entities

Pending Home Sales


Dallas Rally on 2013-01-29 14:02:01
Mark as Spam | Reply to this comment

Hmm Interesting. I am thinking it is because lending is getting out.  A lot of damage has occurred to many good people. Like giving someone bad credit. If you happen to be one of those people get it repaired. Try using a professional company like Lexington Law to help you. Its one of the few well established companies in this arena. 

Add Your Comment