Economic forecasting has become as reliable as weather predictions these days, especially at Reuters, so it’s no surprise that the news agency combined the two in the latest report from the housing markets. Pending home sales dropped over 11% in April, which Reuters blames on tornadoes in the southern part of the country (via Instapundit):
Pending sales of existing U.S. homes dropped far more than expected in April to touch a seven-month low, a trade group said on Friday, dealing a blow to hopes of a recovery in the housing market.
The National Association of Realtors Pending Home Sales Index dropped 11.6 percent to 81.9 in April, the lowest since September. Pending home sales lead existing home sales by a month or two. …
Pending home sales in the South, which was ravaged by tornadoes, dropped 17.2 percent. Sales were also down in the Midwest and the West.
Reuters expected only a 1% drop, which would have been indication enough of continuing trouble, but seems unrealistic given current conditions. Earlier this month, Zillow issued a bleak report on the housing markets, noting that foreclosures are rising again and home values once again dropping. Negative equity is also increasing as a result, which means that homeowners are more or less trapped in their current houses, as they cannot afford to take a loss to buy another home. We saw existing-home sales at nearly flat in April, down only 0.8%, but the sharp drop in contracts in this report means we will see more plunges in that series later.
The flooding in the South probably had more impact than the tornadoes, but the real problems in the housing markets are a glut of inventory in new homes and resales, and a lack of qualified buyers. That’s why inventories across the board rose 9.9% to 3.87 million, more than nine months of sales at current sales rates, up from 8.3 months in March.
These issues won’t improve until we get more qualified buyers in the system, and that won’t happen until we get the job creation engine firing on all cylinders. Thanks to aggressive regulatory expansion by the Obama administration, that day looks farther and farther away.