• by Thom Forbes  @tforbes, March 1, 2016

A January slowdown in signed contracts for the sale of existing homes is being pegged to low inventory rather than being any sign of a faltering economy. 

The National Association of Realtors’ monthly measure of pending home sales was down 2.5% in January to 106.0 from an upwardly revised 108.7 in December. That’s still 1.4% above January 2015 and the index has now gained for 17 consecutive months, the NAR points out, although only September 2014 (1.2%) showed a slower gain during that time. Only the South saw sales gains over the previous month.

“The drop surprised analysts. Economists surveyed by the Wall Street Journal had predicted a 0.5% increase in January’s sales,” writes that paper’s Anna Louie Sussman. “Pending sales offer insight into the housing market’s direction because they measure purchases at the time a contract is signed, rather than at closing,” she informs us.

“While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” according to NAR chief economist Lawrence Yun. “Additionally, some buyers could be waiting for a hike in listings come springtime.”

In a note to clients cited by the WSJ’s Sussman, Pantheon Macroeconomics economist Ian Shepherdson acknowledges the snow but pointed out that sales had also declined in the balmier West. “It’s possible that the drop in the stock market beginning at the start of the year persuaded would-be home buyers to wait a while, but we have no way of knowing for sure,” he writes.

Jonathan Smoke, chief economist of Realtor.com (the official Web site of the NAR), is “optimistic that the pace of homes going into contract will soon pick up again,” Clare Trapasso writes on the site.

“The mortgage rate decline will more than offset the declines in the stock market,” says Smoke. “We should see another year of growth, but not as much as last year because the [inadequate] supply of homes will limit that.”

Indeed, “coming on the heels of recent strong data on consumer spending, the labor market, industrial production and durable goods orders, Monday’s reports did little to change the view that the economy was regaining momentum after slowing to a 1.0% annual rate in the first quarter,” writes Reuters’ Lucia Mutikani.

“The disappointing data tone points to ongoing weakness in the housing and manufacturing sectors,” says Millan Mulraine, deputy chief economist at TD Securities. “Nevertheless, with underlying domestic fundamentals remaining supportive to growth, the economic recovery should regain its footing in the first quarter.”

“First-time buyers in high demand areas continue to encounter instances where their offer is trumped by cash buyers and investors,” the NAR’s Yun writes. “Without a much-needed boost in new and existing-homes for sale in their price range, their path to homeownership will remain an uphill climb.”

Existing-home sales, which are tabulated when a deal closes, make up about 90% of the market and “unexpectedly climbed in January to the second-highest pace since early 2007,” the NAR said  last week, Michelle Jamrisko reports for Bloomberg. Prices climbed from January 2015 as the number of dwellings on the market fell.

The bottom line may be that in a year that is proving unpredictable in many ways, people don’t know what to expect.

“The latest Index of Consumer Sentiment from the University of Michigan's Survey of Consumers indicates that consumers' confidence continues to stagnate by increasing a little, then decreasing a little based on the latest news they see, read or hear,” luxury market tracker Bob Shullman points out in his monthly Insight Briefs emailed yesterday. 

And presidential follies aside, there’s plenty of monkey business ahead to keep us guessing, as the annual Feng Shui Index issued by Kong Kong-based CLSA, the brokerage and investment group, informed us last month. It is, after all, the first Year of the Fire Monkey since 1956.

“There are going to be a lot of ups and downs. The monkey is a creature who is tricky and cunning,” Cherry Ma of the firm's feng shui team says in a piece by the AFP newswire published in the Daily Mail. “There will be fluctuations but it also means opportunities for fast-movers,” she said.

All is revealed: Get moving.