by Bill McBride on 7/22/2010 11:19:00 AM
Thursday, July 22, 2010
Earlier the NAR released the existing home sales data for June; here are a couple more graphs ...
The first graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.
Click on graph for larger image in new window.
Inventory increased 4.7% YoY in June. This is the third consecutive month of a year-over-year increases in inventory, and this is the largest YoY increase since early 2008.
This increase in inventory is especially bad news because the reported inventory is already historically very high, and the 8.9 months of supply in June is well above normal.
The months-of-supply will jump in July as sales collapse - probably to double digits - and a double digit months-of-supply would be a really bad sign for house prices ...
The second graph shows NSA monthly existing home sales for 2005 through 2010 (see Red columns for 2010).
Sales (NSA) in June 2010 were 8.3% higher than in June 2009, and also higher than in June 2008.
With the expiration of the tax credit, I expect to see existing home sales below last year starting in July. In fact I expect sales in July to be well below last year, and probably the lowest since 1997 (or so).
This was another a weak report. Sales were slightly above expectations (5.37 million at a seasonally adjusted annual rate vs. expectations of 5.3 million), but the YoY increase in inventory and the increase in months-of-supply are the real stories.
If months-of-supply increases sharply as I expect, then there will be additional downward pressure on house prices.