While the rest of the US economy was slowly but surely reentering a recession, with the only two pieces of silver lining being the relatively strong, if unbelievable, jobs data (driven by low-wage paying jobs) and the US housing market, moments ago we just got the latest confirmation that one of these two final anchors is slowly falling apart when the perpetually optimistic housing industry organization, NAR, reported that August pending home sales dropped -1.4%, on expectations of a 0.4% increase, and down from a 0.5% jump the month before. Confirming that the Chinese "hot money parking" bid is finally ending, this was the fourth consecutive miss in a row.
The alway entertaining Lawrence Yun, NAR chief economist, did his best to put some much needed lipstick on the pig saying that "even with the modest decline in contract signings, demand continues to outpace housing supply and elevate price growth in numerous markets. "Pending sales have leveled off since mid–summer, with buyers being bounded by rising prices and few available and affordable properties within their budget," he said. "Even with existing–housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago."
Don't worry Larry, this won't continue much longer: :according to Yun, sales in the coming months should be able to roughly maintain their current pace." However, even Larry is starting to warn that the future is no longer so bright: "he warns that there are looming speed bumps that have the potential to impact housing."
The only question is who to blame it on:
"The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being," adds Yun. "Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales."
The breakdown shows that the traditional hot bed of pending home sales, the Northeast (NYC, Boston, DC) led the drop: here the Pending home sales index fell 5.6 percent to 93.3 in August. In the Midwest the index inched down 0.4 percent to 107.4 in August, and is now 6.5 percent above August 2014. Pending home sales in the South declined 2.2 percent to an index of 121.5 in August but are still 4.1 percent above last August. The only thing keeping up the pending home sales market remains California, and the West rose 1.8 percent in August.
And as we explained previously, once China fully cracks down on those pesky hot money outflows, one can kiss the California "pending" housing market goodbye.