7/26/2012
By David Urani, Research Analyst

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Alright if you didn't believe me before surely you'll start to believe me now. That feel-good housing rebound has officially stalled. After new and existing home sales signaled slowdowns for June, the third major sales indicator, the NAR's Pending Home Sales Index completes the trio of terror. Alright, I wouldn't quite call it terror at a 1.4% decline month to month but it's confirmation that the American homebuyer has finally started to get cold feet, with the economy deteriorating and all.

You could blame tight credit, paperwork and inventory shortages as the NAR does (I think they like to keep on rose colored glasses to further their own cause) but in this case I think the simplest explanation is probably the best; consumer demand is being hit by the economy, same as with just about everything else under the sun. Thus, broad declines in the Northeast, Midwest and South, and while the West was up on a seasonally adjusted basis, non-adjusted sales were also down.

I don't want to sound too gloomy though, as the past month's data has only shown a modest setback. The fact is, before this European-sparked global panic set in the fundamentals (demand, supply, pricing) in housing had clearly shifted to position of recovery rather than further correction. In fact, although demand seems to have been dented it's still possible that housing outperforms the broad market. But in terms of housing stocks, they've already exhibited an impressive run since all the way back in October and remain near their peaks; it might be time for the market to take a moment to reassess.

Dow Jones Home Construction Index - 1 year

David Urani
Wall Street Strategies