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Friday, October 19, 2012

Lawler: Comments on the Existing Home Sales Report

by Calculated Risk on 10/19/2012 04:01:00 PM

Economist Tom Lawler sent me his comments on the NAR report:

The National Association of Realtors estimated that US existing home sales ran at a seasonally adjusted annual rate of 4.75 million in September, down 1.7% from August’s slightly upwardly revised (to 4.83 million from 4.82 million) pace. The upward revision to August’s seasonally-adjusted pace was puzzling/mildly amusing, as unadjusted sales were revised downward to 476,000 from 477,000! The NAR’s September seasonally-adjusted sales estimate was close to consensus and just a tad higher than my estimate based on regional tracking, though all of my “miss” was in the seasonal factor for September – my unadjusted sales estimate was “right on.” While seasonally adjusted sales in September were up 11.0% from last September’s pace, unadjusted sales showed a YOY gain of just 2.2% (mainly but not totally reflecting the lower business day count).

The NAR’s estimate of the inventory of existing homes for sale at the end of September was 2.32 million, down 3.3% from August’s downwardly revised (by a hefty 2.8% to 2.40 million from 2.47 million) level and down 20.0% from last September.

According to the NAR, the median existing US home sales price last month was $183,900, up 11.3% from last September, and the median existing SF home sales price was $184,300, up 11.4% from a year ago. August’s median home sales price was revised down by 1.3%, and August’s median SF home sales price was revised down by 1.7% -- resulting in a revised YOY increase of 8.4%, vs. last month’s estimate of 10.2%. The NAR’s median sales price numbers continued to come in higher than what state and local realtor reports would suggest, for unknown reasons.

In its press release the NAR misleading said that “(d)istressed homes3 - foreclosures and short sales sold at deep discounts - accounted for 24 percent of September sales (13 percent were foreclosures and 11 percent were short sales), up from 22 percent in August; they were 30 percent in September 2011.” A footnote in the press release notes that the distressed sales shares are from a monthly survey of realtors (for the Realtor Confidence Index), generally taken from the last week of a given report month through the first week of the subsequent month. The sample size is small and varies over time; is voluntary; and the results often do not represent trends in the market as a whole. Based on available data from various regional reports, the short-sale share of home sales was higher this September than last September, while the foreclosure-sale share was down sharply.

If, in fact, the “distressed” sales share of total home sales had been 24% last month and 30% last September, and if the NAR unadjusted sales estimates AND seasonal factors were correct, then “non-distressed” home sales last month were up about 10.9% from a year ago on an unadjusted basis, and up about 20.5% from a year ago on a seasonally adjusted basis.

Of course, in many markets, especially some hard-hit ones, the distressed share of total sales last month fell by a lot more than that implied by the NAR’s survey. Here’s an updated table for selected markets.

Short Sales ShareForeclosure Sales ShareTotal "Distressed" Share
Las Vegas44.8%23.5%13.6%49.4%58.4%72.9%
Mid-Atlantic (MRIS)12.4%12.6%9.4%14.4%21.8%27.0%
King Co. WA**16.0%10.0%10.0%22.0%25.0%32.0%
Lee County, FL***21.4% 15.9% 37.3%54.0%
Charlotte    15.3%20.9%
Chicago    40.6%40.0%
Hampton Roads VA    25.4%31.6%
Northeast Florida    44.7%49.0%
Memphis*  26.3%30.8%  
Houston  16.1%19.4%  
Birmingham AL  26.6%31.8%  
*share of existing home sales, based on property records
** Third Quarter: total may not add up due to rounding
*** SF Only

The “big” story in the above table, of course, was the huge decline in foreclosure sales this September vs. last September. Foreclosure sales, of course, tend to be “uber-distressed”/”highly motivated.” Short sales, in contrast, are more “mixed” in terms of urgency and distress.

Earlier on Existing Home Sales:
Existing Home Sales in September: 4.75 million SAAR, 5.9 months
Existing Home Sales: A few comments and NSA Sales Graph
Existing Home Sales graphs