Wednesday, April 20, 2016

A Few Comments on March Existing Home Sales

by Bill McBride on 4/20/2016 03:21:00 PM

Earlier: Existing Home Sales increased in March to 5.33 million SAAR

I'd consider any existing home sales rate in the 5 to 5.5 million range solid based on the normal historical turnover of the existing stock. I've seen reports calling the February sales rate "dismal" and the March sales rate "a strong rebound". Nah. This is just normal volatility. Sales in Q1 are up almost 6% from Q1 2015, and that is solid start to the year.

Going forward, there are some economic reasons for some softness in existing home sales in certain areas. 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).

As always, 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.

Inventory is still key.  I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 1.5% year-over-year in March). 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 March (red column) were the highest for March since 2007 (NSA).

Note that January and February are usually the slowest months of the year and March is the beginning of the "selling season".  This is a solid start to the year.