1/25/2012
By David Urani, Research Analyst

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Pending home sales (contracts signed for new homes) for December were up 5.6% year over year, but showed a 3.5% drop month to month. All regions were down except for the Midwest. The real spoiler for the month was an 11% drop in the west, although it should be noted that the previous month had shown an unusually large spike in the west so this looks more like a correction than a true decrease. The NAR has cited delayed contracts as potentially causing volatility in the numbers.

The market had been expecting a 1% drop, so this month's miss isn't a deal breaker although of course we would have liked to have seen better. Yet, the fact remains that if you exclude the previous month, this was still the best reading since April 2010.

The housing stocks are acting okay though today and are mostly trading to the upside. Of course, the president noted last night, as many have been suspecting, that he is going to push through some more housing aid. Like the tax credit and the HAMP program, one would have to really doubt any new plan will make a big difference in the grand scheme. The latest idea is short on details, but in a nutshell it looks like it would be another refinancing plan that would set underwater but responsible borrowers with lower interest rates. Basically, it just looks like the president wants to make it easier to refinance as consumers currently tend to run into a lot of red tape.

Not a game changer, but at this point it's starting to look like the housing market doesn't really need outside help from the government. I think what we are seeing now is that after a protracted downturn, home sales finally found a natural floor and are steadily climbing back up again. In reality, any refinancing plan would act more as a stealth stimulus check to select homeowners rather than a kickstart for the housing market. And you also have to take into account that this Administration has already tried to push refinancing without a lot of success so one has to wonder how successful it would be. The President made a side comment about banks owing consumers back for a deficit of confidence, so it sounds like we could expect to see the Feds try to strong arm the banks again to make new loans.

David Urani
Wall Street Strategies