Pending Home Sales Should Be Weaker Than Expected in September

The NAR is scheduled to report September pending home sales on October 28th and the consensus is expecting no change from August:

 

Yet, according to my friend, Christophe Barraud, Chief Economist and Strategist at Market Securities and also the best forecaster of US statistics since November, pending home sales should decrease by 2.8% MoM in September:

 

Regarding this index which helps to forecast existing home sales, 30 to 45 days in advance, I anticipate a decline from August. According to my estimate, in order for the pending home sales in adjusted value to be stable from August to September, raw data should increase 8.6% YoY. Nevertheless, local data that I gathered show a rise of 5.5%. Indeed, even if pending home sales rose in some areas like in New York (18.6%), they fell in other places like in Arizona (-28.9%). After seasonal adjustment, pending home sales should decrease by 2.8% MoM.

 

This forecast is coherent with comments from Lawrence Yun and Gary Thomas:

 

Lawrence Yun, NAR chief economist, said a decline was expected. “Affordability has fallen to a five-year low as home price increases easily outpaced income growth,” he said. “Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.”
 
NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said there are far-ranging consequences from the repeating stalemates in Washington. “Just one impact of the recent government shutdown – delays in tax transcripts needed for approval of mortgage loans – put a monkey wrench in the transaction process and could negatively impact sales closings in next month’s report,” he said.