Thursday, August 21, 2014

A Few Comments on Existing Home Sales

by Bill McBride on 8/21/2014 03:31:00 PM

The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 5.8% year-over-year in July.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data. 

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 10.7% from the bottom. On a seasonally adjusted basis, inventory was only up 0.2% in July compared to June.

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.

Another key point: The NAR reported total sales were down 4.3% from July 2013, but normal equity sales were probably up from July 2013, and distressed sales down sharply.  The NAR reported that 9% of sales were distressed in July (from a survey that is far from perfect):

Distressed homes – foreclosures and short sales – accounted for 9 percent of July sales, down from 15 percent a year ago and the first time they were in the single-digits since NAR started tracking the category in October 2008. Six percent of July sales were foreclosures and 3 percent were short sales.
Last year in July the NAR reported that 15% of sales were distressed sales.

A rough estimate: Sales in July 2013 were reported at 5.38 million SAAR with 15% distressed.  That gives 807 thousand distressed (annual rate), and 4.57 million equity / non-distressed.  In July 2014, sales were 5.15 million SAAR, with 9% distressed.  That gives 464 thousand distressed - a decline of over 40% from July 2013 - and 4.69 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up slightly (even with less investor buying). 

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

Existing Home Sales NSAClick on graph for larger image.

Sales NSA in July (red column) were below the level of sales in July 2013, and above sales for 2008 through 2012. 

Overall this was a solid report.

Existing Home Sales in July: 5.15 million SAAR, Inventory up 5.8% Year-over-year

Philly Fed Manufacturing Survey increases to 28 in August, Highest since March 2011

by Bill McBride on 8/21/2014 12:45:00 PM

Earlier from the Philly Fed: August Manufacturing Survey

The diffusion index of current general activity increased from a reading of 23.9 in July to 28.0 this month. The index has increased for three consecutive months and is at its highest reading since March 2011 The new orders and shipments indexes remained positive but fell to near their levels in June. The new orders index decreased 20 points [to 14.7], while the shipments index decreased 18 points.
The current indicators for labor market conditions suggested continued modest expansion in employment. The employment index remained positive for the 14th consecutive month but declined 3 points from its reading in July [to 9.1] ...

Most of the survey’s broad indicators of future growth showed improvement this month. The future general activity index increased 8 points and is at its highest reading since June 1992 emphasis added
This was above the consensus forecast of a reading of 15.5 for July.

ISM PMI Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through August. The ISM and total Fed surveys are through July.

The average of the Empire State and Philly Fed surveys was solid in August, and this suggests another strong ISM report for August.

Existing Home Sales in July: 5.15 million SAAR, Inventory up 5.8% Year-over-year

by Bill McBride on 8/21/2014 10:00:00 AM

The NAR reports: Existing-Home Sales Continue to Climb in July

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July from a slight downwardly-revised 5.03 million in June. Sales are at the highest pace of 2014 and have risen four consecutive months, but remain 4.3 percent below the 5.38 million-unit level from last July, which was the peak of 2013. ...

Total housing inventory at the end of July rose 3.5 percent to 2.37 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. Unsold inventory is 5.8 percent higher than a year ago, when there were 2.24 million existing homes available for sale.
Existing Home SalesClick on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in July (5.15 million SAAR) were 2.4% higher than last month, but were 4.3% below the July 2013 rate.

The second graph shows nationwide inventory for existing homes.

Existing Home InventoryAccording to the NAR, inventory increased to 2.37 million in July from 2.29 million in June.   Headline inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Year-over-year Inventory Inventory increased 5.8% year-over-year in July compared to July 2013.  

Months of supply was at 5.5 months in July.

This was above expectations of sales of 5.00 million.  For existing home sales, the key number is inventory - and inventory is still low, but up solidly year-over-year.    I'll have more later ...

Weekly Initial Unemployment Claims decrease to 298,000

by Bill McBride on 8/21/2014 08:30:00 AM

The DOL reports:

In the week ending August 16, the advance figure for seasonally adjusted initial claims was 298,000, a decrease of 14,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 311,000 to 312,000. The 4-week moving average was 300,750, an increase of 4,750 from the previous week's revised average. The previous week's average was revised up by 250 from 295,750 to 296,000.

There were no special factors impacting this week's initial claims.
The previous week was revised up to 312,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 300,750.

This was lower than the consensus forecast of 305,000. 

Wednesday, August 20, 2014

Thursday: Existing Home Sales, Philly Fed Mfg Survey, Unemployment Claims

by Bill McBride on 8/20/2014 08:30:00 PM

From Andrew Ross at the San Francisco Chronicle: Household income hasn't shared in recovery

As of June, median annual household income was 4.8 percent below December 2007, when the recession began, dropping from $56,000 to $54,000. Going back to the good old days, it's down 5.9 percent from January 2000, according to the Sentier Research Group, which compiled the numbers from the latest Current Population Survey by the U.S. Census Bureau.
I think this is real household income (adjusted for inflation). Hopefully, as the unemployment rate continues to decline, the median real household income will start to increase.

• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 305 thousand from 311 thousand.

• At 10:00 AM, Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for sales of 5.00 million on seasonally adjusted annual rate (SAAR) basis. Sales in June were at a 5.04 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.09 million SAAR. A key will be the reported year-over-year increase in inventory of homes for sale.

• Also at 10:00 AM, the Philly Fed manufacturing survey for August. The consensus is for a reading of 18.5, down from 23.9 last month (above zero indicates expansion).

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