Friday, March 16, 2012

Lawler: Early Read on Existing Home Sales in February

by Bill McBride on 3/16/2012 02:41:00 PM

From economist Tom Lawler:

Based on the incoming data I’ve seen so far, I estimate that existing home sales (as reported by the NAR) ran at a seasonally adjusted annual rate of around 4.63 million in February, up 1.3% from January’s pace (which in my mind should be revised upward).

While at first glance the exceptionally strong YOY gains reported by a decent number of realtor associations/boards/MLS might suggest a stronger sales report, one should take into account (1) last February’s relatively weak sales pace; (2) this is a “leap year,” and this February (obviously) had an extra business day (and as a result this February’s seasonal factor is larger than last February’s); and (3) there were some key markets where YOY sales gains were either pretty modest or, for several Florida markets, actually down from a year ago (reflecting substantial declines in REO sales and inventories). E.g., mid-Atlantic sales showed only modest gains, as did some other northeast market (though Massachusetts saw a huge jump), several California markets, and South Carolina (though most North Carolina markets saw hefty YOY increases.)

I should note that recently my projections of the NAR’s numbers have been off by more than they used to be, and perhaps not coincidentally ever since the NAR’s “re-benchmarking.” I don’t know why. I still, e.g., have trouble “explaining” the January NAR report. The NAR’s Midwest sales numbers especially don’t “jive” with state realtor reports (which clearly suggested a much stronger YOY gain than that shown by the NAR), for reasons that are not clear (at least to me).

On the inventory side, I’d guess that the NAR’s existing home inventory number will probably show a small monthly increase, but the YOY decline is likely to increase to about 22% or so to 2.35 million.

On the median sales price side, this February a larger number of associations/boards/MLS reported YOY gains than was the case in January, and most (though by no means all) of A/B/M’s reporting a YOY drop showed a smaller YOY decline in February vs. January. In some Florida markets the huge YOY decline in foreclosure sales was a major reason for reported YOY price gains, but there were gains in other markets not experiencing significant foreclosure share declines. Net, I would “guesstimate” that the median existing SF sales price in February will be down just 0.3% from last February.

On a final note, several realtor associations/boards/MLS have reported SIZABLE YOY gains in pending home sales in February. While I don’t yet have a good “guesstimate” for the NAR’s PHSI release (it’s hard to do, as many A/B/M’s don’t report “new” pending sales), a quick look at reports so far suggest that there could be a pretty sizable increase in the NAR’s Pending Home Sales Index in February.

CR Note: Tom's estimates for sales have always been very close. He was off some in January (his estimate was 4.76 million and the NAR reported 4.57 million SAAR), but he was very close in December (4.64 vs. 4.61).

Based on Tom's estimates for sales and inventory, this would put months-of-supply at 6.1 months, essentially unchanged from January.

The NAR will report February existing home sales next week on Wednesday March 21st and the current consensus is for sales of 4.60 million SAAR.