by Bill McBride on 5/25/2007 02:49:00 PM
Friday, May 25, 2007
For more existing home sales graphs and analysis, please see the previous two posts ...
April Existing Home Sales
More on Existing Home Sales
Click on graph for larger image.
One of the rarely mentioned stories, related to the housing boom, was the increase in turnover of existing homes. This graph shows sales and inventory normalized by the number of owner occupied units.
Note: all data is year-end except 2007. For 2007, the April sales rate and inventory are used. For owner occupied units, Q1 2007 data from the Census Bureau housing survey was used for April 2007.
This graph shows the extraordinary level of existing home sales for the last few years, reaching 9.5% of owner occupied units in 2005. The median level is 6.0% for the last 35 years.
Some of the sales were for investment and second homes, but normalizing by owner occupied units probably provides a good estimate of normal turnover. A decline in sales to 6% of owner occupied units would result in about 4.6 million sales. If sales fall back to the level of 1998 to 2001 (7.3% of total owner occupied units sold) that would be about 5.6 million units in 2007.
Also look at inventory as a percent of owner occupied units; an all time record of 5.6%!
And this takes us back to the inventory and months of supply graph from the previous post.
As I noted, the 'months of supply' metric is now above the level of the previous housing slump in the early '90s, but still below the levels of the housing bust in the early '80s.
However both the numerator and denominator are moving in the wrong directions. Supply is increasing, and will most likely continue to increase through the summer months. And sales are still high (based on percent of owner occupied units) and will probably continue to fall. Right now I'm expecting 'months of supply' to reach 9.5 months by mid-summer.