The good news is building

It’s been about two years since the bottom fell out of the economy. Since then, the good economic news has come in dribs and drabs, and has generally been lost in the torrent of bad news. Slowly but surely, however, the good news is building in its frequency and magnitude. The National Association of REALTORS (NAR) recently released the updated Pending Home Sales Index, and it is some of the best news we’ve seen lately.

The index has been on an upward trend since hitting the bottom last June, and the October index was 10.4% higher than the September figure. That’s a lot of positive change in just one month. That is good news, indeed, even if the index is still quite a bit lower than it was in October 2009 (which was artificially inflated by the tax credit).

This index is a leading indicator of the state of the economy, and is based on the number of homes that are under contract, but not yet closed. It is pretty closely related to the number of actual closings two months later. It is expected that the index will continue to climb into 2011. According to Lawrence Yun, the chief economist for NAR, “the housing market clearly is in a recovery phase. . ."

Good news is also coming in from the National Association of Home Builders (NAHB) that a couple of other leading indicators – the Multifamily Production Index (MPI) and the Multifamily Vacancy Index (MVI) are both strengthening. The MPI, which measures multifamily housing starts, is stronger than it has been since 2007. The MVI, is showing decreasing vacancies in multifamily housing. These indices show an increasing pressure on housing.

Fannie Mae and NAR are both expecting an increase in real estate sales through the end of 2011. Even so, because of the current and expected inventory of foreclosed properties, home prices will probably not be increasing for another 12 to 18 months.

It appears we are at the bottom of the market now. If you intend to buy when the cost of housing is lowest, now is the time to do it.

In another post, I’ll talk about why it makes sense to buy now, even though the prices might not have completely bottomed out. It has to do with price versus cost. . . stayed tuned.


We cannot make good news out of bad practice. – Edward R. Murrow