Monday, January 25, 2010

Existing Home Sales decline Sharply in December

by Bill McBride on 1/25/2010 10:00:00 AM

The NAR reports: December Existing-Home Sales Down but Prices Rise; 2009 Sales Up

Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million units in December from 6.54 million in November, but remain 15.0 percent above the 4.74 million-unit level in December 2008.

For all of 2009 there were 5,156,000 existing-home sales, which was 4.9 percent higher than the 4,913,000 transactions recorded in 2008; it was the first annual sales gain since 2005.
...
Total housing inventory at the end of December fell 6.6 percent to 3.29 million existing homes available for sale, which represents a 7.2-month supply at the current sales pace, up from a 6.5-month supply in November.
Existing Home Sales Click on graph for larger image in new window.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in Dec 2009 (5.45 million SAAR) were 16.7% lower than last month, and were 15% higher than Dec 2008 (4.74 million SAAR).

Of course many of the transactions in November were due to first-time homebuyers rushing to beat the initial expiration of the tax credit (that has now been extended). That pushed sales far above the historical normal level; based on normal turnover, existing home sales would be in the 4.5 to 5.0 million SAAR range.

Existing Home Inventory The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 3.29 million in December from 3.52 million in November. The all time record high was 4.57 million homes for sale in July 2008.

This is not seasonally adjusted and December is usually the lowest month of the year - so this decline is mostly seasonal.

Existing Home Sales Months of SupplyThe third graph shows the 'months of supply' metric for the last six years.

Months of supply increased to 7.2 months in December.

A normal market has under 6 months of supply, so this is still high.

This decline was expected. I'll have more later ... but remember to ignore the median prices (that is distorted by the mix), and to focus more on new home sales than existing home sales.

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