Economy Watch: Pending Home Sales Edge Up
- Feb 28, 2012
February 28, 2012
By Dees Stribling, Contributing Editor
The National Association of Realtors reported on Monday that its Pending Home Sales Index was up 2 points in January to 97, which happens to be the highest level for the index since April 2010, back when the market was high on the temporary homebuyer tax credit. The index is 8 points higher than during January 2011, when it stood at 89.8.
The index is considered a forward-looking indicator, since it’s based on sales inked but not yet closed. An index of 100 equals the average level of contract activity during 2001, which was the first year of the index’s existence, besides being the first of five consecutive record years for existing-home sales (healthy growth for a few of those year, but then evolving into bubble growth).
“Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year,” said NAR chief economist Lawrence Yun, who never misses a chance to be optimistic. “With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.” (That means you, Vegas.)
Buffett Calls Houses Good Investment; Ohio to Destroy Thousands of Them
Speaking on CNBC on Monday, Warren Buffett didn’t get around to mentioning the name of his successor at Berkshire Hathaway. But he did say that now is the time to buy single-family homes and rent them out, and that he would do that in a big way, if he could. “If I had a way of buying a couple hundred thousand single-family homes and had a way of managing — the management is enormous … I would load up on them and I would take mortgages out at very, very low rates … it’s a very attractive asset class now.”
Buffett might see the theoretical upside in single-family housing, but not all housing is considered so valuable. The attorney general of Ohio recently said that the state will facilitate the demolition of about 100,000 foreclosed and vacant houses within the state, using $75 million of the $97 million that Ohio is receiving from the robo-signing settlement to give to localities for that purpose. The theory is the destruction of properties long-neglected by the lenders who have foreclosed on them will rid neighborhoods of structures that are dragging property values down for everyone else in the area.
“One of the necessary components of Ohio’s economic recovery is ridding our communities of the blight of abandoned homes,” Attorney General Mike DeWine said in a statement. “These vacant properties are a drag on our recovery, inhibiting the growth of our neighborhoods. They create a toxic breeding ground for crime. And they depress the value of the remaining homes in that neighborhood.”
Market for Italian Debt Calms
Italy sold 12.25 billion euros ($16.45 billion) of six-month bills on Monday, and they priced to yield 1.2 percent, which counts as good news for the shaky edifice of the euro (and the Italian economy, for that matter), since it’s the lowest yield since September 2010, and considerably below last month’s rate of about 2 percent. The debt is still relatively risky: the yield on one-year German debt, also sold on Monday, was 0.08 percent.
Italy doesn’t really deserve the credit for the good sale, however. On Wednesday, the European Central Bank will offer another round of three-year loans to European governments at low, low prices, making Italian debt a more attractive proposition (for now). On Tuesday, the Italians will try to persuade investors to buy 10-year debt, which might be more of a challenge, or at least more costly for the Italian economy.
For what it’s worth, Wall Street still can’t hold on to 13,000 — the Dow Jones Industrial Average ended Monday just below that figure, down 1.44 points, or 0.01 percent. The S&P 500 and the Nasdaq were up a little: 0.08 percent and 0.14 percent, respectively.