The National Association of Realtors tries hard, but can’t come up with a compelling way to spin today’s existing home sales.
The good news is that the year over year decline in sales velocity wasn’t that bad, so the months-to-clear-inventory ratio ticked up only modestly. The bad news is that sales velocity is stable only because prices are plummeting (11% year-over year). We continue to believe that prices will likely fall at least into 2010.
NAR: Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 3.1 per cent to a seasonally adjusted annual rate1 of 4.98 million units in October from a downwardly revised pace of 5.14 million in September, and are 1.6 per cent below the 5.06 million-unit level in October 2007…
Total housing inventory at the end of October slipped 0.9 per cent to 4.23 million existing homes available for sale, which represents a 10.2-month supply2 at the current sales pace, up from a 10.0-month supply in September…
The national median existing-home price3 for all housing types was $183,300 in October, down 11.3 per cent from a year ago when the median was $206,700…
More details below.
Bloomberg noted the price drop is “signaling a deepening housing recession going into 2009,” but I think their interpretation is in error. This is another of those “Looks bad, actually is good” data points. Prices remain elevated, and the sooner they revert back to historic means, the better.
Of course, it wouldn’t be an existing home sales release without some minor idiocy from the crew at the NAR, who wrote:
The national median existing-home price3 for all housing types was $183,300 in October, down 11.3 per cent from a year ago when the median was $206,700. There remains a significant downward distortion in the current price from a large number of distress sales at discounted prices; the median is where half of the homes sold for more and half sold for less. (emphasis added)
Funny, I do not seem to recall them warning about upward distortions of prices due to the combination of absurdly easy credit, ultra-low rates, and the appraisal fraud some of their membership helped to promote.
Home prices have been falling on a year-on-year basis for more than 2 years and, in recent months, the price declines have accelerated. As long as inventories stay very high and a high proportion of sales are distressed, prices will continue to decline. Moreover, a recovery in the housing market is unlikely until home prices stabilise.
The inescapable conclusion, therefore, is that median sales prices will continue to decline for the foreseeable future.
It might seem like sales have stabilised, however many of the sales this year are foreclosure resales. As an example, DataQuick reported that 51% of all sales in Socal in October were foreclosure resales as opposed to 16% in October 2007. This is probably boosting sales at the low end as investors buy properties to rent. Although foreclosure resales will stay elevated in 2009, I expect total sales to fall further.
Also, the impact of the most recent wave of the credit crisis is just beginning to impact home sales. I expect sales in November and December to be lower than in 2007.
There have been 4.23 million sales so far in 2008, and sales are currently on pace for just over 4.9 million total this year – the lowest annual sales since 1997…
Here is a video report from CNBC’s Diana Olick: Existing Home Sales. Listen to the end (hat tip Hal)
“The Realtors are reporting that foreclosure sales – that is distress sales being foreclosures or short sales – have risen from what they thought was 35% to 40% of all existing home sales, now they are saying it is 45% of all existing home sales. They also are saying they are seeing further softening toward the November numbers.
And they are hearing from the Realtors they talk to that the re-default rate on a lot of these loan modifications are running at 50% – that is half those of modifications aren’t working.”
More detail from NAR:
Single-family home sales declined 3.3 per cent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007. The median existing single-family home price was $181,800 in October, down 11.2 per cent from a year ago.
Existing condominium and co-op sales eased by 1.8 per cent to a seasonally adjusted annual rate of 550,000 units in October from 560,000 in September, and are 12.0 per cent below the 625,000-unit pace a year ago. The median existing condo price4 was $193,000 in October, which is 13.0 per cent below October 2007.
Regionally, existing-home sales in the Northeast slipped 1.2 per cent to an annual pace of 830,000 in October, and are 9.8 per cent lower than a year ago. The median price in the Northeast was $241,700, down 9.8 per cent from October 2007.
Existing-home sales in the West eased by 1.6 per cent to an annual rate of 1.21 million in October but are 37.5 per cent higher than October 2007. The median price in the West was $231,400, down 27.0 per cent from a year ago.
In the South, existing-home sales declined 3.2 per cent to an annual pace of 1.84 million in October, and are 10.2 per cent below a year ago. The median price in the South was $161,100, which is 5.8 per cent lower than October 2007.
Existing-home sales in the Midwest fell 6.0 per cent in October to a pace of 1.10 million and remain 9.1 per cent below October 2007. The median price in the Midwest was $149,400, down 6.7 per cent from a year ago.
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