Friday, January 17, 2014

Lawler: Early Read on Existing Home Sales in December

by Calculated Risk on 1/17/2014 04:20:00 PM

From housing economist Tom Lawler:

Based on realtor association/MLS reports from across the country, I estimate that US existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.96 million in December, up 1.2% from both November’s seasonally adjusted pace and last December’s seasonally adjusted pace. I estimate that unadjusted sales (as measured by the NAR) showed a slightly higher YOY growth than SA sales, reflecting this December’s higher business day count than last December.

YOY sales results varied massively across the country. California home sales showed a sizable YOY drop last month, reflecting a large decline in “distressed” sales as well as a steep decrease in investor buying of both distressed and non-distressed sales, combined with relatively flat sales to owner occupants. Phoenix and Las Vegas also experienced big YOY declines, for similar reasons. Some realtors attributed the weak sales to low inventories, but a better way to put it was that sales were down sharply from a year ago in these areas because of a lack of inventory priced either attractively for investment/rental purposes or at prices readily affordable to many potential buyers.

A few areas where the government shutdown appeared to impact closed sales in November experienced a rebound in closed sales in December. For example, in November closed MLS-based sales in the DC metro market were down much more sharply than “normal” on the month, and were off 13.7% YOY. Closed sales bounced back up last month, and were up 9.7% YOY. However, new pending sales in December were down sharply in December, and were off 7.0% YOY, suggesting that “something else” (including high listing prices) was negatively impacting sales in the area.

There were several other markets where closed sales rebounded in December from November but where pending sales in December looked weak.

On the inventory front, the inventory of existing homes for sale typically declines significantly from November to December in most (but not all) parts of the country, and that was clearly the case last month. In fact, inventories as reported by realtor associations/MLS declined by a bit more than the “seasonal” norm in a significant number of markets. Based on these reports as well as reports by various entities that track listings, I’d “guesstimate” that the monthly decline in the inventory of existing homes for sale from November to December was about 8.3%, compared to last December’s monthly drop (as estimated by the NAR) of 8.0%.

Trying to gauge the level of the NAR’s existing home inventory estimate for December, however, is a bit trickier. The monthly decline in the NAR’s existing home inventory estimate in November was significantly smaller both than realtor association/MLS reports and listing trackers reports would have suggested, and I think it is likely that the NAR’s inventory estimate will be revised downward. It is worth noting that the NAR’s preliminary inventory estimate has been revised downward in each of the last six reports (by an average of 1.8%), and that last November’s preliminary inventory estimate was revised downward in the subsequent report by 2.0%. If November’s inventory estimate is revised downward by 1.9%, AND December’s estimate is 8.3% lower than November’s estimate, then the December estimate will be up 2.7% from a year earlier. (You have to be a NUT to try to estimate the NAR data!)

Finally, based on realtor association/MLS reports, my “gueestimate” is that the NAR’s estimate of the median existing SF home sales price is December will be up by about 8.0% from a year earlier. (The November MSP was up 9.4% YOY).

CR Note: The NAR will release the December Existing home sales report next Thursday, and the early consensus is for sales of 5.0 million SAAR (Close to Lawler's estimate).