Blame it on the Weather

“We are seeing temporary near-term weather disruptions in much of the country, but there is an underlying pattern of stabilization in the housing market,” says David Lereah, Chief Economist for the National Association of Realtors in the press release for Pending Home Sales in January (Pending Home Sales are based on contracts signed during one month, not closings, which are represented in the monthly Existing Home Sales number).

The Pending Home Sales Index fell 4.1% in January from Decemberand is 8.9 percent lower than January of 2006. This number comes after a 3% jump in sales in January, those of course based on contracts signed in December. And the Realtors say it’s all about the weather.

So we decided to call our brethren (mostly sisteren) over at WeatherPlus (NBC owns us all) to find out if this theory holds water. It does and it doesn’t.

In the South, where pending home sales were off the most, 11.7%, temperatures held pretty normal, but precipitation in much of the area was well above normal. OK, so people don’t like to go home shopping in the rain, and if they do, they’re going to find a droopy front lawn and a lot of muddy footprints all over the kitchen.

In the Northeast, where pending home sales jumped 9.3% from the month before, temps were well above normal in the first part of the month, although things started to go south toward the end of the month.

The issues I have are out West, where the index was basically flat, up just 0.2%. The West saw below average precip and very average temps. So what’s up with the West? Well we saw it in the existing home sales number from January, sales there were up, while prices finally were coming down. The West is really the last region to jump into the housing correction, as prices remained stubbornly high for quite a while. Now it looks like sales there will not be as good in February, and, again, the West is really the least affected by the weather.

So now I have to throw in the mortgage variable. The subprime seepage, as I like to call it, is the tightening throughout the mortgage market because of the subprime implosion. Federal regulators are calling for stricter standards, the big banks, like Credit Suisse, are jacking up prices to mortgage lenders, and as more and more subprime lenders go belly up, there are just far fewer options for folks without good credit or with too much debt in relation to income.

“I don’t think there's any question it's going to be harder to get a mortgage these days, says Guy Cecala, President of Inside Mortgage Finance Publications. “You’re going to see lenders go back to saying we want to see some money put down on a home, 10 or 20% plus more verification of income and assets, it's certainly going to be a tougher lending environment for borrowers.”

So the barometer in the mortgage market isn’t looking much more positive than the barometer outside my office window. And remember, if we’re going to blame home sales on the weather, February came in like a lion and went out like a lion, so you can expect the Existing Home Sales numbers in April, which would represent contracts signed in February, to be positively, well, precipitous.

Questions? Comments?