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For Better And Worse: NAR Existing Home Sales And Prices

Source: WSJ

For all the coverage coming out of the housing sector coverage yesterday [Businessweek] [1], I think the consensus reached by many was that the numbers were better than expected. I’d say I basically agree but I am not sure what that really means for the market.

Last week, Trulia [2] asked me to be on their “power panel” and venture a guess [3] of the percent change in the housing numbers would be released by NAR on monday [4].

Annual national existing homes sales data as of August:

My prediction: -16.3%
Actual (NAR) : -12.6%

Annual sales price of existing homes as of August:

My prediction: -0.4%
Actual (NAR) : -1.7%

Prior month change in inventory:

My prediction: +6.3%
Actual (NAR) : +1.5%

I got the right direction on all three questions but needed a little fine tuning on the amounts. Given regional variations in the data, I can live with the differences.

The most telling statistic [Motley Fool] [5] in all of this is the number of existing home sales. All 4 regions (Northeast -11.6%, Midwest -11.1%, South -7.4% and West -22.8%) showed a decline in the number of sales. This is the recurring theme in many local markets. Why? There is no sense of urgency on the buyer side at the moment. The lack of buyer urgency is substantiated by declining mortgage rates over the last quarter. This fairly significant decline did not spark additional sales activity. 30 Year mortgages are between 0% and 0.25% above rates seen when the Fed began tightening its belt in June 2004 and 1 Year ARMs are between 1% and 1.25% above the prior rates. Perhaps ARMs are part of the problem. 30% of originated mortgages are ARMs and most of the investor purchases were financed with ARMs and they are more than a quarter of all transactions…

The sales price of existing home sales seems to be less consistent by region. 3 of the 4 regions showed a price decline (Northeast -3.9%, Midwest -1.1%, South -2.6%) while the West increased 0.3%. The west seems to be behind the curve a bit since prices showed a gain but housing sales dropped about double the the rate of anywhere else.

The west seems to be 6 months behind the rest of the country.