What? Pending Home Sales Unexpectedly Surge?

The housing industry is equally tied to the economic outlook. This means if gas prices, food prices, salaries and other economic influences don't improve or get worse, this 'surge' in the housing market will be seen as little more than investors buying in on the best properties, willing to take a loss for the short term and riding the values upwards when the turn-around comes.

Leading economic pundits say the 'downturn' should only last through the end of the year, with some saying it will go another eighteen months. Neither is an unreasonably long time to wait for an investment that could return 10%-15% or more especially considering the interest rates one gets for other less risky investments or the return on commodities, which are relatively volatile given the instability in the prices of staples like corn, soy and other crops effected by ethanol production. So I expect that investors are going to make up the largest number of buyers entering the housing market right now since they can, in general, afford to buy in earlier and ride a little longer to get a return.

Throw this on top of the normal buyers who, despite the issues in the housing market, still buy or sell homes - which seems to peak in the spring - as well as more and more sellers who finally recognized the futility of holding out for a higher price and lowering their asking prices and you get a surge. I agree it's premature to say this is a 'turnaround'. An increase in the average price of homes will be the indicator of a turnaround, not home sales.

Fatesrider of CA 3:05PM June 09, 2008