Friday, January 22, 2016

A Few Random Comments on December Existing Home Sales

by Bill McBride on 1/22/2016 12:21:00 PM

Everyone expected a rebound in existing home sales in December. The key reason for the decline in November was the new TILA-RESPA Integrated Disclosure (TRID). In early October, this new disclosure rule pushed down mortgage applications sharply, however applications bounced back - and so did home sales in December. No surprise.  Note: TILA: Truth in Lending Act, and RESPA: the Real Estate Settlement Procedures Act of 1974.

However, most analysts underestimated the strength of the rebound. (Not CR readers who expected an above consensus report).

As I've noted before, there are some economic reasons to expect some softness in existing home sales in 2016. Low inventory is probably holding down sales in many areas, and there will be weakness in some oil producing areas (see: Houston has a problem).

Earlier: Existing Home Sales increased in December to 5.46 million SAAR

I expected some increase in inventory in 2015, but that didn't happened.  Inventory is still very low and falling year-over-year (down 3.8% year-over-year in December). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

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 December 2006 (NSA).