Numbers released today by the National Association of Realtors via its Pending Home Sales Index revealed that pending sales for existing homes in the U.S. dropped in November.
I mention this because it's a fairly new data point starting to be reported on, which a lot of people don't really understand what it is.
It was started in 2001 by the National Association of Realtors, which simply measures the number of contracts signed on houses. Don't mistake this for closings, which isn't what it measures. That results in numbers being revised almost monthly, as a percentage of signed contracts aren't closed on, and the resultant changes occur.
For business leaders the question must be asked if it's relevant to anything. My thought is it probably isn't too much.
The major reason is it doesn't really represent anything real. It's an attempt to measure intentions and not an actual measurement of hard data based on actual home sales.
But as Diana Olick, writing for CNBC.com said, "...housing is a behemoth that moves slowly and methodically, and one predictive number that doesn't gauge actual sales, shouldn't be taken as a snapshot of where exactly the housing market is going."
I agree with her analysis. I'm not even sure why something like this data is presented. It's an obvious method of putting the name of the National Association of Realtors in the public eye, but other than that, I don't see much relevance in the index whatsoever.
To me it's just data that doesn't help make anything clearer or can help a business in any way. About the only thing I see it could help with is the measuring of past offers for houses versus the number of closings. That may help a very limited number of people who need to know those figures.
Overall, the Pending Home Sales Index is something that should just be ignored.
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