Daily Forecast Update: ISM Index, Pending Home Sales

November 02, 2009

By Lawrence Yun, Chief Economist

Daily Forecast Update

• NAR's monthly official forecast as of October 1st
• GDP 2009 Q4:  +2.2%↑
• GDP 2010 Q1:  +3.1%
• GDP 2010 Q2:  +2.8%
• Unemployment rate by the end of 2009: 9.8% ↓
• Average 30-year fixed mortgage rate by mid-2010 2009: 5.6%  

What does today's data mean for REALTORS® and consumers?

• Good news. Home buyers continue to stay in the market and are signing contracts. Home buying generally tanks in September after the summer season, but this September witnessed a rather modest decline. On a seasonally adjusted basis, to comply with government's GDP reporting, pending home sales rose solidly. I attribute the strong activity largely to the buyers trying to meet the deadline to get the tax credit.
• More good news. Even for people who may not be able to meet the November 30th deadline - which is for settlement and not just contract signing - there is likely to be an extension in the date to the middle of next year.The Senate will vote for cloture today and will vote on the tax credit extension in a day or two. The bill is expected to pass and become law by the end of the week.
• Good news from the manufacturing sector. After being punished severely this recession, the manufacturing sector is showing signs of revival. There is a hint that job hiring in the sector is just around the corner.
  

Pending Home Sales

• Pending home sales rose for the eight consecutive months. Read more here.

ISM Index

• ISM measures manufacturing activity based on survey results of managers. In the latest, the index rose to 55.7.
• The index of 50 or higher implies an expansion in the sector. It is the second straight months of expansion in the manufacturing sector.
• Most importantly, the job hiring is on the horizon in this sector. For the first time in over a year, the employment component had a better than 50 reading, meaning there are more companies now hiring than firing.
• Both new orders and production components were solidly in the expansionary territory. The inventory is still declining - meaning that sales are higher than the rise in production of manufactured goods.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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