Don’t be fooled by higher May home sales: Radar Logic

Pending home sales may have grown 8.2% between April and May, but a housing recovery remains a ways off, real estate analytics firm Radar Logic said this week. Radar Logic picked apart the latest pending home sales report, saying 8.2% month-over-month sales growth does not equate to a recovery when sales are down 20.4% from last year when consumers rushed to buy to take advantage of federal tax credits. Instead, Radar Logic concluded that May’s pending home sales remain “essentially flat.” Furthermore, an influx of distressed properties, including many that are still waiting to come online, remain a constant threat to market confidence and home prices, according to the report. “Regardless of what may happen to sales contract activity in any given month, the fact remains that the inventory of homes for sale and in the foreclosure pipeline far outstrips current demand,” Radar Logic said. “Potential buyers are cognizant of this fact and the negative impact it will have on future home price appreciation, and are therefore choosing to stay out of the market. As long as the supply overhang persists it will weigh on housing demand.” Radar Logic said even though the S&P/Case-Shiller indices for April experienced their first gains in 8 months, that’s not enough to suggest the tide has turned when considering the presence of distressed home sales. “As real estate owned (REO) by lenders and servicers and homes sold at foreclosure auctions sell at a significant discount (39 percent as of April), the decline in such sales as a percentage of total helped to buoy home price indices beyond the actual appreciation in the prices of individual homes,” Radar Logic said. Write to: Kerri Panchuk.

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