Let’s dig a little deeper on this subject…..Here’s what Bloomberg had to say about this morning’s reported jump in pending home sales (signed sales agreements).

Pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October, indicating the industry at the center of the last recession is stabilizing as the job market improves.  Or maybe not!

The Wall Street Examiner breaks down these numbers and explains why.

Let’s focus on the actual, not seasonally adjusted number. In my housing updates in the Wall Street Examiner Professional Edition I convert the Realtors’ Pending Home Sales number to an actual number equating the index to the existing home sales number for the month that will be released late in the month. This number rose by 35,500 units or 9.2% m/m. Sounds good, right? Not so much when considering that September’s level of 385,500 is the worst September level in the past 15 years, including being the worst September since the housing collapse began in 2006-07.

Where does that leave the October number? At 421,000, it is the worst October since the housing collapse started, and the worst October level in the past 15 years. How is that recovery? To me, it looks like a dead cat bounce from an atrocious level in September, a simple reversion to trend, and a weak trend at that.

What about seasonality? Arbitrary seasonal adjustment factors produce a specific but entirely fictional number that almost always results in a false impression that conditions are better or worse than they actually are. Still, seasonality must be considered. The best way to do that is to compare the current month with the behavior of a representative sample of recent years.

As it turns out, October is typically an up month. This year’s gain of 35,500 compares with a gain of 29,000 last year. There was a gain of 40,500 in 2007 when the overall market collapse was in its infancy but the pundits were declaring their first of many false bottoms, and a gain of 77,000 at the tail end of the bubble in 2006. October 2008, at the nadir of the first wave of the housing crash, only saw a drop of 7,000. In the overall scheme of things, this year’s bounce from catastrophically low levels looks like nothing more than reversion to trend from weaker than trend.

Read more: http://www.businessinsider.com/pending-homes-sales-jump-joke-2010-12#ixzz171QIm6l9