Friday, January 23, 2015

A Few Comments on December Existing Home Sales

by Bill McBride on 1/23/2015 11:56:00 AM

The most important number in the NAR report each month is inventory. This morning the NAR reported that inventory was down 0.5% year-over-year in December.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data - and December is usually the lowest month of the year for inventory.

Clearly - in many areas - inventory is still too low.

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 5.5% from the bottom. On a seasonally adjusted basis, inventory was down 2.2% in December compared to November (most of the decline reported by the NAR was seasonal).

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 3.5% from December 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 up slightly in December (11 percent) from November (9 percent) but are down from 14 percent a year ago. Eight percent of December sales were foreclosures and 3 percent were short sales.
Last year in December the NAR reported that 14% of sales were distressed sales.

A rough estimate: Sales in December 2013 were reported at 4.87 million SAAR with 14% distressed.  That gives 682 thousand distressed (annual rate), and 4.19 million equity / non-distressed.  In December 2014, sales were 5.04 million SAAR, with 11% distressed.  That gives 554 thousand distressed - a decline of about 19% from December 2013 - and 4.49 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 7%.. 

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

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in December (red column) were the highest since for December since 2006.

Earlier:
Existing Home Sales in December: 5.04 million SAAR, Inventory down slightly Year-over-year