Economy Watch: Pending Home Sales Surprise With Uptick

The National Association of Realtors said on Thursday that its pending home sales index increased in July to 79.4, a rise of 5.2 percent.

September 3, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Diana Parkhouse

The National Association of Realtors said on Thursday that its pending home sales index increased in July to 79.4, a rise of 5.2 percent. Pending home sales aren’t actual, close-the-deal home sales, but they are a bellwether for sales in about two months, and as such the upward movement surprised economists.

Not that it’s a terrific number by itself. On this particular index, anything over 100 indicates pending sales activity higher than in 2001, which was the case through all of the mid-2000s, but not since 2007. June 2010’s reading of 75.5, in the immediate wake of the expiration of the federal homebuyer tax credit, was the rock-bottom lowest the index has ever been, meaning July’s number is a little better than the pits.

Even the professionally optimistic Lawrence Yun, chief economist of NAR, could only offer so much comfort in the face of this kind of market. “Recovery looks to be a long process,” he said in a statement on Thursday. “Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

Employment Treads Water

New claims for unemployment fell during the week ended August 28 by 6,000, to a seasonally adjusted 472,000, according to the U.S. Department of Labor. The four-week moving average of claims, which is less volatile, was also down by 2,500 to 485,000. That average had been creeping up during much of the summer.

Both are small fluctuations in the labor market, but at least positive ones. Moreover, they might mean that while the economy had a bad summer, at least a lot of employers aren’t in a panic to fire everyone in sight, as they famously were during the fall of 2008 and into 2009.

Earlier in the week, the latest report from Chicago-based Challenger, Gray & Christmas Inc. noted that planned firings in August 2010 were down 55 percent from the same month a year earlier. So it seems that employment is running in place–no way to grow out of a recession, but not necessarily a recipe for another helping of abject, 2008-style recession.

Shoppers Do a Little More Shopping

In August retailers have traditionally use back-to-school to move the merch, and U.S. consumers went for it a little more than expected this year, according to the International Council of Shopping Centers index of 31 major retailers, which was up 3.2 percent during the month compared with July. The sales are measured in stores that have been open for at least a year.

Naturally, there were some winners and some losers among the 31 retailers. The likes of Costco Wholesale Corp. (sales up 7 percent for the month), Limited Brands Inc. (Victoria’s Secret et al., up 10 percent) and Macy’s (up 4.3 percent) did well. Some teen retailers–always tough territory, considering the fickleness of the customer base–didn’t do that well, such as Aeropostale Inc., which saw a 1 percent decline in sales during the month.

Wall Street had another up day on Thursday, perhaps buoyed by the modest economic improvements detailed above. In any case, the Dow Jones Industrial Average gained 50.63 points, or 0.49 percent, while the S&P 500 and the Nasdaq were up 0.91 percent and 1.06 percent, respectively.