Wednesday, November 28, 2007

More on October Existing Home Sales

by Bill McBride on 11/28/2007 12:28:00 PM

For more existing home sales graphs, please see the earlier post: October Existing Home Sales

To put the NAR numbers into perspective, here are the year-end sales, inventory and months of supply numbers, since 1969.

Existing Home Sales, Inventory, Months of Supply Click on graph for larger image.

This graph shows the actual annual sales, year end inventory and months of supply, since 1982 (sales since 1969). For 2007, the October inventory and Seasonally Adjusted Annual Rate (SAAR) for sales were used.

The current inventory of 4.453 million is just below the all time record set in July and well above the record year end inventory for any other year. The "months of supply" metric is 10.8 months. The "months of supply" is now above the level of the previous housing slump in the early '90s, and closing in on the worst levels of the housing bust in the early '80s (inventory was 11.5 months at the end of 1982).

Both the numerator and the denominator are moving in the wrong direction. Not only is inventory at record levels, but sales - though falling - are still somewhat above the normal range as a percent of owner occupied units.

Existing Home Sales and Inventory, Normalized by Owner Occupied UnitsFor the second graph, sales and inventory are normalized by the number of owner occupied units. This shows the annual variability in the turnover of existing homes, with a median of 6% of owner occupied units selling per year.

Currently 6% of owner occupied units would be about 4.6 million existing home sales per year. This indicates that the turnover of existing homes - October sales were at a 4.97 million Seasonally Adjusted Annual Rate (SAAR) - is still above the historical median.

The third graph is an update to my mid-year forecast adding the actual results for July, August, September and October in 2007.

Existing Home Sales Forecasts Update: Labels fixed.

My forecast was for sales to be between 5.6 and 5.8 million units.

At mid-year I updated my forecast to the lower end of the previous range (5.6 million units). Through October there have been 4.9 million units sold, and it looks like the total for 2007 will be just over 5.6 million units.