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Wednesday, September 21, 2011

Existing Home Sales: Comments and NSA Graph

by Calculated Risk on 9/21/2011 11:59:00 AM

A few comments and a graph (of course):

• The NAR reported that inventory decreased in August from July, and that inventory is off 13.1% from August 2010. Other data sources suggest that the NAR is overstating inventory (inventory will be part of the coming revisions). Also it appears inventory has continued to decline (year-over-year) in September.

This year-over-year decline in inventory is one of the most important stories of the year for the existing home market, and is hardly being mentioned. I suspect many homeowners are "waiting for a better market", but less inventory will put less downward pressure on prices. Of course REO activity is picking up again and distressed sales will put more downward pressure on prices - but this decline in inventory is still important.

• The NAR provided an update on the timing of the "benchmark revisions":

Update on Benchmark Revisions: ... Preliminary data based on the new benchmark is undergoing review by professional economists. This process is expected to take some time before finalized revisions can be published to address any issues that may surface in the review process and to update monthly seasonal adjustment factors; NAR is committed to providing accurate, reliable data. Publication of the revisions is expected in several months, and we will provide a notice several weeks in advance of the publication date.
This revision is expected to show significantly fewer homes sold over the last few years (perhaps 10% to 15% fewer homes in 2010 than originally reported), and also fewer homes for sale.

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

Existing Home Sales NSA Click on graph for larger image in graph gallery.

The red columns are for 2011.

Sales NSA are above last August - of course sales declined sharply last year following the expiration of the tax credit in June 2010 - but sales are also above August 2008 and 2009 (pre-revision).

The level of sales is still elevated due to investor buying. The NAR noted:
All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

Investors accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.
Existing Home Sales in August: 5.0 million SAAR, 8.5 months of supply
Existing Home Sales graphs