Tuesday, June 21, 2011

Existing Home Sales: Comments and NSA Graph

by Bill McBride on 6/21/2011 12:15:00 PM

A few comments and a graph (of course):

• There was no mention of the "benchmark revision" that was supposed to be announced this summer (Summer starts now!). I was hoping for at least a mention on the timing of the release. This revision is expected to show significant fewer homes sold over the last few years (perhaps 10% to 15% fewer homes in 2010), and also fewer homes for sale.

Hopefully the NAR will provide an update soon - and hopefully the NAR will provide 1) the revised data for the last decade and 2) a description of the new methodology (as part of this revision, the NAR is expected to change their method for estimating sales and inventory).

• The NAR continues to complain about lending standards. NAR economist Lawrence Yun said: “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery.”

Actually standards are fairly reasonable for qualified buyers. Of course many qualified buyers bought last year - using the ill-considered homebuyer tax credit - and that pulled demand forward. The housing market is still paying the price for that policy mistake.

Of course the NAR never complained about the "very loose standards" during the housing bubble!

• The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSA Click on graph for larger image in graph gallery.

The red columns are for 2011.

Sales NSA are well below the tax credit boosted level of sales in May 2010, but slightly above the level of May sales in 2009. The level of sales is still elevated due to investor buying. The NAR noted:

All-cash transactions stood at 30 percent in May, down from 31 percent in April; they were 25 percent in May 2010; investors account for the bulk of cash purchases.

First-time buyers purchased 35 percent of homes in May, down from 36 percent in April; they were 46 percent in May 2010 when the tax credit was in place. Investors accounted for 19 percent of purchase activity in May compared with 20 percent in April; they were 14 percent in May 2010.
• As Tom Lawler noted yesterday, the Pending Home Sales Index will probably show a significant increase in May - so reported sales in June and July will probably be higher. The Pending Home Sales Index will be released on Wednesday June 29th.

FOMC Meeting Preview
May Existing Home Sales: 4.81 million SAAR, 9.3 months of supply
Existing Home Sales graphs