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Tuesday, April 25, 2006

Existing Home Sales

by Calculated Risk on 4/25/2006 10:03:00 AM

UPDATE: The National Association of Realtors (NAR) released their data for Existing Home Sales in March. NAR reported:

Sales of existing homes edged up in March following a strong rebound in February, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 0.3 percent to a seasonally adjusted annual rate1 of 6.92 million units in March from a pace of 6.90 million in February, but were 0.7 percent below a 6.97 million-unit level in March 2005.

David Lereah, NAR’s chief economist, said sales are leveling out. “It’s a good sign to see home sales holding close to the level of a strong rebound in the month before,” he said. “This is additional evidence that we’re experiencing a soft landing. We may see some minor slowing in home sales as interest rates rise, but the market clearly is stabilizing.” Lereah expects 2006 to be the third strongest year on record for home sales.”
Existing Home Sales are a trailing indicator. The sales are reported at close of escrow, so March sales reflects agreements reached in January and February.

Also note that mortgage applications fell about 10% in February and March (compared to January). This probably indicates that existing home sales will fall in the coming months on a seasonally adjusted (SA) basis.

Click on graph for larger image.

Existing Home inventories rose to 3.19 million units in March. This is the start of the listing season, and I expect inventories to continue to rise.

If sales fall about 10% (as indicated by the MBA purchase index) and inventories continues to rise at the current pace, the months of supply could be over 6 months by Summer. Usually 6 to 8 months of inventory starts causing pricing problem - and over 8 months a significant problem.

New Home sales (released tomorrow) is usually a better indicator of the housing market.