Monday, December 22, 2014

A Few Comments on November Existing Home Sales

by Bill McBride on 12/22/2014 12:41:00 PM

• Once again housing economist Tom Lawler's forecast of 4.90 million SAAR was closer than the consensus (5.20 million) to the NAR reported sales (4.93 million).

• The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 2.0% year-over-year in November.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data.  Also it isn't always clear what is included in "inventory" (some areas report "active" listings, others all listings including pending short sales).   Also, some sources are reporting more inventory, as an example, Zillow's data shows inventory was up 12% year-over-year in November.  That is a big difference!

The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.

Existing Home Inventory Seasonally AdjustedClick on graph for larger image.

This shows that inventory bottomed in January 2013 (on a seasonally adjusted basis), and inventory is now up about 9.1% from the bottom. On a seasonally adjusted basis, inventory was down 2.5% in November compared to October.

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

And another key point: The NAR reported total sales were up 2.1% from November 2013, however normal equity sales were up even more, and distressed sales down sharply.  From the NAR (from a survey that is far from perfect):

Distressed sales – foreclosures and short sales – were unchanged in November from October (9 percent) and remained in the single digits for the fourth month this year; they were 14 percent a year ago. Six percent of November sales were foreclosures and 3 percent were short sales.
Last year in November the NAR reported that 14% of sales were distressed sales.

A rough estimate: Sales in November 2013 were reported at 4.83 million SAAR with 14% distressed.  That gives 676 thousand distressed (annual rate), and 4.15 million equity / non-distressed.  In November 2014, sales were 4.93 million SAAR, with 9% distressed.  That gives 444 thousand distressed - a decline of about 34% from November 2013 - and 4.49 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 8%.. 

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

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in November (red column) were below the levels for November in 2012 and 2013.

Earlier:
Existing Home Sales in November: 4.93 million SAAR, Inventory up 2.0% Year-over-year