Existing-home sales drop 13.2% as prices fall 7.1%
Existing-home sales (Seasonally adjusted) rose 3.1% to an annual rate of 5.00 million units in July, from a downwardly revised level of 4.85 million in June. These are 13.2% percent lower than the 5.76 million-unit pace in July 2007.
The sales level was the highest since 5.03 million in February, while the monthly gain was the biggest one since March 2007.
Total housing inventory rose 3.9% to a record 4.67 million existing homes available for sale, representing an 11.2.-month supply. This matches the highest inventory totals ever. The NAR has said a 5-6 month's supply is what is seen in stable housing markets.
Prices also fell. The national median existing-home price for all housing types was $212,400 in July, down 7.1% from a year ago prices of $228,600. The NAR notes that "The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the geographic composition of sales can distort median price data."
We have mentioned this seasonality before, but that is not the only factor involved in the monthly sales increase. About 40% of the existing home sales are now distressed nationwide. Hence, the downward pressure on prices, which are attracting value buyers.
Of course, the usual parade on CNBC got this one wrong -- again.
>
Non Seasonally Adjusted Existing Home Sales
Chart courtesy of Calculated Risk
Previously:
Existing Home Sales, Non Seasonally Adjusted, Explained (March 2008)
http://bigpicture.typepad.com/comments/2008/03/existing-home-s.html
Revisiting Housing Seasonality & the Perennial Bottom Callers (July 2008)
http://bigpicture.typepad.com/comments/2008/07/revisiting-seas.html
Source:
July Existing-Home Sales Show Gain
NATIONAL ASSOCIATION of REALTORS, August 25, 2008
http://www.realtor.org/press_room/news_releases/2008/july_ehs_show_gain
Monday, August 25, 2008 | 10:29 AM | Permalink
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Of course CNBC got it wrong. I would expect no less (more?) out of them.
The big question is - what % of these sales were bank-owned, foreclosed homes? Until supply comes down (amazingly, it's still going up) and most bank-owned homes are sold, how can there be a stabilization of prices and the over housing market?
Posted by: Jeff M. | Aug 25, 2008 10:50:05 AM
So, prices are plummeting and inventory is still at all time highs? Um. Yeah. I don't think we've bottomed yet. How low do prices have to go before we start working off that inventory?
Ugh.
- AT
Posted by: Andy Tabbo | Aug 25, 2008 10:51:02 AM
Single and condos both jump
Existing home sales rose 3.1% m/m in July to a 5.0 million sales rate, well above consensus and ML expectations. From regional survey we know that purchases of foreclosed homes dominated the sales activity in July, as they have for the past several months. Home prices fell compared to June and on a year-on-year basis were down 7.1%. Median prices of single homes fell to $210k, wiping out gains on any home purchased at the median price after mid-2005. Home prices remain 15-20% overvalued nationwide, in our view, so it will remain to be seen whether
transactions at these prices will cause many purchasers to regret jumping into the
market.
Supply surges in condo market
In spite of this sale surge, the supply of new homes jumped again in the month, to
11.2 months, on a decline to 10.6 months in the single home market and notably a surge to 15.1 months on condos. So at this time it appears that the condo market is coming under increasing pressure and will thus be a sector where we will likely see increasing home price concession. Watch for divergences between the RPX home index from Radar Logic, which contains condo transactions, versus Case Shiller index, which tracks only single family homes.
Posted by: Sheryl King | Aug 25, 2008 10:59:20 AM
Yet again, another report that will be spun as a positive. I already heard it from a co-worker this morning "homes sales are up dude, I think things are truning around!!"...and he was serious. Higher sales with declining prices, growing inventory & increasing foreclosures is...errrr....bad. Of course when I mention this to these people that only read headlines I hear crickets chirping.....
Posted by: Flic | Aug 25, 2008 11:04:54 AM
The big question is - what % of these sales were bank-owned, foreclosed homes?
I think 1/3 of them according to Calculated Risk.
Posted by: Joe Klein's conscience | Aug 25, 2008 11:14:12 AM
"The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal change..."
I don't understand this quote. It seems to be saying that seasonal adjustment cannot compensate for seasonality in the data! But the whole point of seasonal adjustment is to eliminate the seasonal variation in the data and show the underlying trend. Why is seasonal adjustment of home sale data (if done correctly) less valid than seasonal adjustment of GDP or unemployment data?
~~~
BR: Because of the methodology the NAR uses to calculate seasonality is not great, mostly due to home buying patterns.
Note the chart above -- a perfect SA would flatten out that rise and fall - but they don't.
Posted by: Phil P | Aug 25, 2008 11:18:18 AM
Excellent article from Kass today....
http://www.thestreet.com/story/10434490/1/kass-blame-game-is-dishonest.html?puc=newshome
Posted by: Jeff M. | Aug 25, 2008 12:11:27 PM
If one third of home sales are foreclosures, what about the other two thirds? Those are not foreclosures, but real Americans, buying real homes made right here in the US of A.
If you tell people that you 'think' this housing data is bad - and they say otherwise - realize that these are family folks. Why are you against the American family? ...and - I take it - the American family farm?
And what about the American farmer?
...hand-tilling his little patch of land, hoping, praying that Obama loses so he can pass it along to his heterosexual son unencumbered by death taxes. These American farmers never asked the government for a darn thing, yet YOU... You anti-American, anti-NAR bloggists are threatening the very American way of life as we have known it for a thousand years.
Your guy's policies will cause these farms to fall into the hands of Iranian Sovereign Wealth Funds that will develop them into massive condo projects further increasing the only slightly elevated inventory levels, thereby stopping dead in their track shoes the American dream for young married couples (real marriages, not like that 'Ellen' marriage - which I do not approve of) who want to buy their first home. A family home.
The Iranians drill, drill, drill and they're rich. Why can't we? Obama, that's why.
...while your anti-drilling 'environMENTALISM' is driving up the price of gas which increases the Federal tax deficit (according to a Large-font email I received from a guy I drink American-brewed beer with) means funding is cut off to our schools, which will ruin our local University's chance at a national championship.
Posted by: VennData | Aug 25, 2008 12:25:51 PM
I wish I could be paid to be wrong more often than a stopped clock.
Posted by: Joshua | Aug 25, 2008 12:31:20 PM
@VennData: What the hell are you talking about? Please stop it with this "anti-American" garbage. There are real issues to be addressed.
Posted by: Jeff M. | Aug 25, 2008 12:35:44 PM
...and another thing. Obama wants to "sit down and talk" so bad with the Iranians? I hope he does. I hope they teach him a thing or two about drill bits.
Posted by: VennData | Aug 25, 2008 12:35:59 PM
@ Jeff M.:
I think your sarcasm detector is broken today. ;)
Posted by: mark | Aug 25, 2008 12:46:45 PM
@Mark: You're right. I think it's because I'm a little crankier than normal today on this Monday and with the convention starting. Seeing and hearing Larry Kudlow first thing in the morning will do that to a person. Sorry about that.
Posted by: Jeff M. | Aug 25, 2008 1:08:29 PM
Bill Griffeth is doing a kick ass job today . . . filling the role of that idiot cheerleader, Dennis Kneale.
Posted by: TheGuru | Aug 25, 2008 1:22:25 PM
The vast majority of Limbaugh listeners and FoxNews watchers would completely agree with VennData's hilarious diatribe, right down to the 1,000 years of the American way of life.
One thing: VD forgot to mention the Obama plot to teach our American children the insidious notion that the earth orbits the sun.
Posted by: bluestatedon | Aug 25, 2008 1:27:45 PM
BR: Because of the methodology the NAR uses to calculate seasonality is not great, mostly due to home buying patterns.
Doesn't months of inventory already have seasonality built into its calculation? I would think it would have to. X number of houses for sale going into the winter would be more months of inventory than the same number going into the summer buying season. Unless it is approaching twelve months long, in which case it would be a wash.
Glancing around at various sites, this is a pretty common quote: "Months of inventory is calculated by taking the number of housing units available (active listings) and dividing that by the number of housing units sold during the past month." But heck! Look at that chart above. The seasonality looks pretty predictable to me and that overly simplistic calculation makes MOI a seasonal number too when it should not be. Yeesh. Me thinks only the math-phobic ended up in real estate.
Posted by: Darkness | Aug 25, 2008 1:43:17 PM
This is a newb question:
Regarding the graph that shows the NSA, is an Existing Home Sale measured by when the home actually closes Escrow or when it opens Escrow?
I'm just trying to figure out what month I should close escrow to fully leverage the supply/demand pricing to my advantage being a first time home buyer.
Posted by: Jefferson | Aug 25, 2008 1:48:55 PM
I'm just trying to figure out what month I should close escrow to fully leverage the supply/demand pricing to my advantage being a first time home buyer.
Probably Feb.
Of 2013.
Posted by: JP | Aug 25, 2008 1:55:38 PM
Erin Burnett on CNBC asking if "this is it, have we finally.....reached a bottom" in housing? Time to hit the mute button again.
Posted by: Jeff M. | Aug 25, 2008 2:21:07 PM
Are these Orwellian housing headlines the reason Fannie is up 10% today?
Posted by: mappo | Aug 25, 2008 2:39:26 PM
...from a downwardly revised level...
Last month was worse than we thought, so this month is doing much better.
Posted by: daveNYC | Aug 25, 2008 2:48:13 PM
As I wrote a couple of weeks ago, the PHSI index was good news and we see today that it successfully predicted todays good news in existing home sales levels. Inventories and prices still look ugly, however.
Posted by: SteveW | Aug 25, 2008 6:49:03 PM
"Regarding the graph that shows the NSA, is an Existing Home Sale measured by when the home actually closes Escrow or when it opens Escrow?"
The existing home sales number represents the number of closings that occured during the month.
Dan M
Posted by: Dan Miller | Aug 25, 2008 6:55:32 PM
It sure is interesting to watch the way that information is taken in various parts of the internet.
I heard the report this morning... in fact I saw a local version last night on the news. Talking about how the only buyers of the interviewed real estate agent were 'investors'.
Then today, on NPR I heard them reporting this news and pointing out two things. One, that investors were becoming a larger part of the buying market. Two, that the 'inventory' pace was at a double digit high.
The question to ponder is... if 'investors' are buying up the inventory, do you think they're buying one at a time then they're done? Or are they buying more than one property...
and if they're buying more than one property at a time, do you think the inventory projections, based on number of sales per month then divided into the inventory numbers to show how many months it will take to clear out the inventory... do you think that pace will step up if 'investors' are buying more units at a time than the 'usual' pace.
think.
-][
Posted by: John | Aug 25, 2008 7:02:23 PM
FYI. In Sonoma county CA there are about 1000 homes REO by banks, but not listed for sale. that would represent about 1/3 of the inventory on the "market". So, the problem is much worse than reported b/c there is no catagory to account for REO by bank but not listed. Is there?
Posted by: johnnyvee | Aug 25, 2008 7:16:50 PM
