Wednesday, April 13, 2011

Lawler: Early Read on Existing Home Sales and Inventory for March

by Bill McBride on 4/13/2011 04:22:00 PM

From economist Tom Lawler:

Based on the available data on home sales from local MLS, I estimate that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of around 5.08 million in March, up 4.1% from February but down 6.6% from last March’s pace.

Based on various data sources, including local MLS reports, I’d estimate that existing homes listed for sale increased by 1.5-2% from February to March. However, for some unknown reason the NAR’s methodology has tended to show bigger increases/smaller declines in February, and smaller increases/bigger declines in March, than available data on listings suggest. (That “trend” was evident again this February, when listings data suggested a small monthly decline but NAR “showed” a 3.5% increase). If past “NAR strangeness” holds, then the NAR will probably report inventories that are flat to maybe even down slightly from February to March – even though “they weren’t.” If the NAR’s inventory reading were flat then the NAR would show existing home inventories as being down 3.8% from last March – and any reasonably reading would show a YOY drop, as the VAST majority of local MLS have reported inventory declines from a year ago.

For those who forgot, the NAR doesn’t actually “add up” existing homes listed for sale across the country to derive its existing home inventory number. Rather, the NAR gets data on “months’ supply” from the 160+ MLS/associations in its sample, and then – after “grossing up” sample sales to a “national” estimate (based on decadal benchmarks, the last one being done a decade ago) – uses the reported “months’ supplies” to get a national inventory number. As noted before, the “definition” of “inventory” varies across MLS. In addition, not all MLS run reports exactly on the same time. Moreover, inventory numbers in an MLS at a given time may not always accurately reflect the listing status of a given property.

CR Note: The NAR needs to fix these data issues. Hopefully the new methodology will be announced this summer.

Existing home sales for March will be released next Wednesday, April 20th, at 10am ET.