by Calculated Risk on 9/22/2014 11:55:00 AM

The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 4.5% year-over-year in August.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data. 

The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.

Click on graph for larger image.

This shows that inventory bottomed in January 2013 (on a seasonally adjusted basis), and inventory is now up about 9.7% from the bottom. On a seasonally adjusted basis, inventory was down 0.1% in August compared to July.

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

And it appears investor buying is declining. From the NAR:

All-cash sales were 23 percent of transactions in August, dropping for the second consecutive month (29 percent in July) and representing the lowest overall share since December 2009 (22 percent). Individual investors, who account for many cash sales, purchased 12 percent of homes in August, down from 16 percent last month and 17 percent in August 2013. Sixty-four percent of investors paid cash in August.

And another key point: The NAR reported total sales were down 5.3% from August 2013, but normal equity sales were probably up from July 2013, and distressed sales down sharply.  From the NAR (from a survey that is far from perfect):

Distressed homes – foreclosures and short sales – represented 8 percent of August sales, remaining in the single-digits for the second straight month and down from 12 percent a year ago. Six percent of August sales were foreclosures and 2 percent were short sales.

Last year in August the NAR reported that 12% of sales were distressed sales.

A rough estimate: Sales in August 2013 were reported at 5.33 million SAAR with 12% distressed.  That gives 640 thousand distressed (annual rate), and 4.69 million equity / non-distressed.  In August 2014, sales were 5.05 million SAAR, with 8% distressed.  That gives 404 thousand distressed - a decline of over 35% from August 2013 - and 4.65 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales flat or down slightly. 

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

Click on graph for larger image.

Sales NSA in August (red column) were below the level of sales in August 2013, and above sales for 2008 through 2012. 

Overall this was a solid report.

Earlier:
• Existing Home Sales in August: 5.05 million SAAR, Inventory up 4.5% Year-over-year