Monday, November 23, 2015

A Few Random Comments on October Existing Home Sales

by Bill McBride on 11/23/2015 01:02:00 PM

Earlier: Existing Home Sales in October: 5.36 million SAAR

I expected some increase in inventory this year, but that hasn't happened.  Inventory is still very low and falling year-over-year (down 4.5% 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.

It would seem if we do see lower sales - and higher prices - that should eventually lead to more inventory.  So far the opposite has been true.

Also, 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, the NAR reported distressed sales declined further year-over-year and are now at the lowest level since the NAR started tracking distressed sales in 2008:

Distressed sales – foreclosures and short sales – declined to 6 percent in October, which is the lowest since NAR began tracking in October 2008; they were 9 percent a year ago. Five percent of October sales were foreclosures and 1 percent 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 October (red column) were the highest for October since 2006 (NSA).