by Bill McBride on 12/16/2012 11:19:00 AM
Sunday, December 16, 2012
Economist Tom Lawler sent me the table below of short sales and foreclosures for a few selected cities in November. Keep this table in mind when the NAR releases existing home sales on Thursday.
The NAR headline number will probably be around 5 million SAAR, but there are other signs of significant change in the housing market. First, inventory has declined sharply, and there is very little inventory in many areas. Second, it appears that the share of conventional sales in certain markets has increased significantly (these are normal sales - not foreclosures or short sales). Both the decline in inventory, and the increase in conventional sales, are signs of moving towards a more normal housing market.
Look at the right two columns in the table below (Total "Distressed" Share for Nov 2012 compared to Nov 2011). In every area that reports distressed sales, the share of distressed sales is down year-over-year - and down significantly in most areas. The NAR will release some distressed sales measurements Thursday from an unscientific survey of Realtors - and I have little confidence in the survey results - but these local reports suggest distressed sales have fallen sharply in many areas.
Last month, CoreLogic sent me their data on distressed and conventional sales showing the percent of distressed sales falling. If we use the NAR estimate for sales, and CoreLogic's estimate of distressed share, conventional sales are now back up to around 3.8 million SAAR. The NAR reported total sales were up 10.9% year-over-year in October, but using this method, conventional sales were up almost 18% year-over-year.
Also there has been a decline in foreclosure sales just about everywhere. Look at the middle two columns comparing foreclosure sales for Nov 2012 to Nov 2011. Foreclosure sales have declined in all these areas, and some of the declines have been stunning (the Nevada sales were impacted by a new foreclosure law). There will probably be an increase in foreclosure sales in some judicial states late this year and in 2013, but overall foreclosures will probably be down next year.
Also there has been a shift from foreclosures to short sales. In most areas, short sales now far out number foreclosures, although Minneapolis is still an exception with more foreclosures than short sales. Note: This shift to short sales could reverse if the Mortgage Debt Relief Act is not extended.
Imagine that the number of total sales doesn't change over the next year - some people would argue that is "bad" news and the housing market isn't recovering. But also imagine that the share of distressed sales declines 20%, and conventional sales increase to make up the difference. That would be a positive sign - and that is what appears to be happening.
Table from Tom Lawler:
|Short Sales Share||Foreclosure Sales Share||Total "Distressed" Share|
|Hampton Roads VA||28.3%||33.0%|
|*share of existing home sales, based on property records|