Friday, August 17, 2012

Lawler: Early Look At Existing Home Sales in July

by Calculated Risk on 8/17/2012 03:35:00 PM

From economist Tom Lawler:

Based on reports from various state and local realtor associations, boards, and/or MLS, I estimate that US existing home sales as estimated by the NAR ran at a seasonally adjusted annual rate of 4.47 million in July, up 2.3% from June’s preliminary estimated pace. On the NAR’s preliminary June sales estimate, which was way below consensus and lower than my below-consensus forecast, state and local realtor/MLS reports released following the NAR’s EHS release were for the most part lower than I had assumed, and seemed to confirm the below-consensus pace of existing home sales in June. By the same token, however, the local realtor data released across the country seemed to suggest that existing home sales were a bit stronger than the NAR’s preliminary estimate (as was the case in May, when sales were revised upward from a SAAR of 4.55 million to 4.62 million). My “best guess” is that June’s existing home sales will be revised upward by a similar amount – from 4.37 million to around 4.44 million. Net, then, I expect that July’s seasonally adjusted existing home sales pace will be little changed from June’s upwardly revised pace.

While June and July existing home sale at first glance seem a bit disappointing relative to previous expectations, a major reason for the weaken-than-consensus sales is a much larger-than-consensus decline in the “distressed” – and especially the foreclosure – share of resales. E.g., in the markets shown in the “distressed home sales share” table [below], the distressed home sales share for those combined markets this July was down about ten percentage points from last July! (The drop for the whole country, of course, was probably smaller). “Non-distressed” sales have actually been running very strong relative to a year ago – for the markets on page one the YOY gain in “non-distressed” sales was over 30% -- and that strength, combined with significant declines in the inventory of homes for sale, has contributed to the upturn in home prices this year.

On the inventory front, the combination of various “trackers” of select metro markets and realtor reports suggests to me that the inventory of existing homes for sale at the end of July was probably down by about 22% or so from a year ago. How that will translate into a NAR estimate, however, is not clear. E.g., firms that track listings and/or folks who track realtor reports were very surprised that the NAR’s existing home inventory fell by 3.2% from June to July, and that July’s inventory number was down 24.4% from last July. I’m guessing that the June inventory number will be revised upward by around 1.7% (reflecting the upward sales revision), and that the NAR’s inventory estimate for July will be down by about 22.2% from last July, which would imply a monthly increase (from an assumed upward revision in June) of 0.8%.

On the median sales price side, for two months in a row the NAR’s preliminary median sales price estimates have been revised downward significantly, with the biggest revisions coming in the Northeast. I wouldn’t be surprised to see a downward revision in the June MSP as well. For July, using a sales-weighted average methodology, I estimate that the July median existing SF home sales price as estimated by the NAR will show YOY gain of about 7.8%.

CR Note: The NAR is scheduled to release the existing home sales report on Wednesday, August 22nd at 10 AM ET. The preliminary consensus is for sales of 4.50 million SAAR in July (close to Lawler's estimate). Based on Lawler's sales and inventory estimates, months-of-supply would be unchanged at 6.6 months.

Short Sales ShareForeclosure Sales ShareTotal "Distressed" Share
Las Vegas40.0%20.2%20.7%50.2%60.7%70.4%
Mid-Atlantic (MRIS)11.3%10.2%8.7%15.1%20.0%25.2%
Southern California18.7%17.4%21.0%32.6%39.7%50.0%
California (DQ)19.0%17.3%22.0%34.5%41.0%51.8%
Lee County, FL17.3%18.8%15.9%30.6%33.2%49.4%
Hampton Roads VA29.1%30.3%
Northeast Florida39.0%44.1%
Rhode Island24.8%20.3%