Pending Sales for November were just released and despite the market blowing it off, it was a significant print. The consensus was for Pendings to be down 2%...instead they were down a big daddy whopper 16%. Now that's a miss. It goes to show how twisted housing analysts have become...slaves to stimulus. This release just gave you a glimpse of the new normal (ex-stimulus) in housing. Last month when new home sales came out far below expectations, several analysts said "it's a blip because the stimulus was going away". No, that was not a blip -- that was the real market showing itself just like it did this morning in the Pending release. Already the analysts are trying to compare this morning's release to last Nov 2008 but you can't do that. This is because last Nov the QE was not in effect yet, rates were sky-high (about 6% to 6.5%), lending guidelines were all over the map, and prices were still in free fall along with the global financial markets. There was not a soul going pending - comparing Nov 09 with 08 is apples to oranges. Despite the $8k going away for buyers who went pending in Nov 2009, buyers still had a much more stable environment this year than last with rates 100bps lower. This is why comparing Oct 2009 with Nov 2009 is a much better comp that Nov 2008. But in Dec 2008 everything changed with massive gov't intervention and a crash in rates. The Fed QE forcing rates down sharply in Dec and spurring serious buying is why going forward -- beginning with December Existing Home Sales due out in a couple of weeks -- YoY comps will get much tighter, with many misses on tap in the near to mid term. In fact, my early CA survey shows sales down YoY about 20%. Last Dec, there was a robust 37,836 sales. In Nov 2009, there were only 35,860. I expect Dec CA sales to be roughly 30k. That is a big MoM and YoY miss and the theme for 2010 house sales because of the lack of inventory due to foreclosure moratoriums, mortgage mod initiaves, and epidemic negative equity preventing 10s of millions from selling and re-buying. Remember, negative equity does not start at 100% for most...it starts at the point where they can't sell their house for enough to pay the loan, the Realtor and put a down payment on the new vintage loan...perhaps 75% on Jumbos and 85%-90% on conforming loans. On a national basis, Existing Sales will fall sharply in Dec but I think they will still beat Dec 2008's 361k...but not by much. To sell remotely the same number of houses in 2010 as in 2009 many things have to go right. The most important is more foreclosures. They made up just under 40% of all sales in 2009 and are what is in the most demand. There are enough foreclosures hung up in the pipeline right now to satisfy demand for a long time. If foreclosures and short sales surge early in the year, sales counts have a shot at down 10% from 2009. If not, expect down 20% at least. The second most important is rates - they have to stay very low. We know refi and purchase activity dry up in the mid 5%'s. In July and August 2009 when rates ticked up to the high 5%'s sales began to wane fast. Then when rates plunged 100bps, housing picked back up sharply going into the original Nov 30th ex-stimulus date. But with increased foreclosures and short sales, come all the house price and write down challenges we experienced when foreclosures were coming without interference. Having their cake and eating it too will be a difficult task in the housing sector for the gov't in 2010.