NAR Calls Bottom for Existing Home Sales; Pending Sales Increase

The National Association of Realtors said today that it is expecting existing-home sales to trend upward in 2008. The trade organization’s Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain registered by the index, but remained 18.4 percent below the October 2006 index of 106.8. NAR chief economist Lawrence Yun characterized the mortgage disruptions — you know, the historic market dislocation that last saw WaMu on Monday slashing its dividend and projecting a 40 percent drop in originations next year? — as “unusual” and having peaked in August. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,â€? Yun said. The forecast released today expects that existing-home sales are likely to total 5.67 million this year, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, the NAR said, and then rise 0.3 percent to $218,300 in 2008. Economic forecasting is a tough business — but the NAR is clearly out of its milieu in this arena. In a post looking ahead to 2008, Calculated Risk takes a look at the forecasting prowess of the realtors and concludes, “I think their forecasting model is broken.”