by Bill McBride on 4/20/2011 11:30:00 AM
Wednesday, April 20, 2011
Earlier the NAR released the existing home sales data for March; 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 graph gallery.
Although inventory increased from February to March (as usual), inventory decreased 2.1% year-over-year in March (from March 2010). This is the second consecutive month with a small YoY decrease in inventory.
Inventory should increase over the next few months (the normal seasonal pattern), and the YoY change is something to watch closely this year. Inventory is already very high, and any YoY increase in inventory would put more downward pressure on house prices.
The second graph shows existing home sales Not Seasonally Adjusted (NSA).
The red columns in January, February and March are for 2011.
Sales NSA are below the tax credit boosted level of sales in March 2010, but above the level of March sales in 2008 and 2009.
The bottom line: March is the beginning of the selling season, and sales activity (so far) is above the 2008 and 2009 levels. Much of this activity is from all cash-sales (both investors and homebuyers). The NAR reported "All-cash sales were at a record market share of 35 percent in March, up from 33 percent in February; they were 27 percent in March 2010."
The NAR also mentioned: "Distressed homes – typically sold at discounts in the vicinity of 20 percent – accounted for a 40 percent market share in March, up from 39 percent in February and 35 percent in March 2010." A higher percentage of distressed sales probably means lower prices - and we should expect the repeat sales indexes to show further price declines in March.
The year-over-year decline in inventory will put less downward pressure on house prices, although the level is still very high (and this is just the visible inventory).
Note: The Case-Shiller price index will be released next Tuesday (April 26th), and is released with a significant lag. The Case-Shiller report will be for February (average of three months) - and the NAR report, with the high level of distressed sales and cash buyers, suggests further price declines in March.