September pending home sales inch higher

The National Association of Realtors just released data on pending home sales for September. This data series tracks contract signing activity vs. contract closings (which is what the regular monthly sales data tallies). That makes it a leading indicator for future closed sales. So what did the numbers show?

* Pending sales notched a small gain in September. Sales rose 0.2% between August and September, compared with forecasts for a 2% decline.

* However, the pending home sales index – at 85.7 – is still down 20.4% from 107.6 a year ago. The August reading was the lowest on record (The NAR has pending sales data going back to 2001).

* Pendings fell in two out of four regions of the country – down 10.1% in the Northeast and 0.1% in the West. Meanwhile, sales popped 5.4% in the Midwest and 1.5% in the South.

How would I characterize the September pending home sales data? Better than a sharp stick in the eye. Sales inched higher overall, compared with expectations for a decline. It seems the Federal Reserve's surprise interest rate cut may have helped bring a few buyers out of the woodwork.

But there are a few key flies in the ointment. First, the September reading is still the second worst on record. Second, a couple of home builders have indicated that the housing market deteriorated in October vs. September. And third, we're experiencing renewed credit turmoil -- something that's prompting lenders to tighten mortgage standards. Those don't bode well for the future. I still doubt we'll see a lasting market rebound until later in 2008 or possibly 2009.