Friday, October 23, 2015

A Few Random Comments on September Existing Home Sales

by Bill McBride on 10/23/2015 02:43:00 PM

Once again, housing economist Tom Lawler's projection of the NAR reported sales rate was much closer than the consensus. For September, the NAR reported sales of 5.55 million on a seasonally adjusted annual rate (SAAR) basis, the consensus was 5.35 million, and Lawler's projection was 5.56 million (almost exact).  Thanks to Tom for sharing his research with all of us!

Yesterday: Existing Home Sales in September: 5.55 million SAAR

Even though sales were up in September, I expect that the seasonally adjusted pace for existing home sales will slow in coming months due to limited inventory and higher prices.

However, if sales do slow, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.  So some slowing for existing home sales (if it happens) will not be a big deal for the economy.

Also, I've been expecting some increase in inventory this year, but it hasn't happened yet.  Inventory is still very low (down 3.1% year-over-year in September). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

Also, the NAR reported distressed sales declined a little further year-over-year:

Distressed sales — foreclosures and short sales — remained at 7 percent in September for the third consecutive month; they were 10 percent a year ago. Six percent of September sales were foreclosures and 1 percent (lowest since NAR began tracking in October 2008) were short sales.
The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSAClick on graph for larger image.

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