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| April Existing Home Sales Data Weren’t As Bad As the Headlines Indicate |
| Written by Jonathan Smoke | |
| 05.27.2008 | |
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Discuss this article on the forums. (0 posts) The National Association of Realtors reported existing home sales for April on Friday, and you would have thought from the reaction that they reported a startling decline. The press is fixated on the totals, which are being influenced by a glut of condos. And remember from last week that even more condos are being permitted and started. NAR reported that total existing-home sales declined 1% to a seasonally adjusted annual rate of 4.89 million units in April from an upwardly revised rate of 4.94 million in March. Single family existing home sales  fell 0.5% to a seasonally adjusted annual rate of 4.34 million in April from 4.36 million in March. It is possible and highly likely that these numbers will be revised, erasing this slight decline.Condos, on the other hand, fell over 5% March to April. The months’ supply of total inventory rose to 11.2 months. This too startled people as it is the highest number seen in the total inventory data. Mind you these numbers have only been collected since 1999. Have the last 9 years been normal? Do I need to answer that question? Again, a better data point is the months’ supply of single family homes. It rose to 9.7 from 9.6 in March. Again this was a minor blip within a margin of error. Furthermore, months supply is a hodgepodge of seasonally adjusted sales out of inventory, which isn’t seasonally adjusted. It is normal for this number to rise in April. Over the last 20 years it has risen, usually more than 1 tenth of a percentage point, 75 percent of the time. Another fallacy being promoted in the ether is that inventories are actually artificially low because people are afraid to put homes on the market. The rise in foreclosures actually works against this. Furthermore, the evidence shows unequivocally that gross inventories have risen dramatically in recent months. April’s single family inventory number reported by NAR is an all-time high. Our Altos Research powered 25-City composite view of Sales Trends shows inventories also at new highs. I can argue that people are more optimistic about selling now, thus listings are increasing. People are more optimistic because prices are stabilizing on average. And more importantly, the average days on market for listed homes is declining. Take a look at the above two charts. Do you notice that the average days on market began to decline starting in mid January? Well, inventories of listing began to rise starting at the same time. People are encouraged by increasing activity to list now, the traditional time of year to try and sell homes. Clearly we aren’t out of the woods yet, but Friday’s release by NAR wasn’t bad. The bad pockets in the housing market are in condos and in former bubble markets or markets in economic decline. And, condo inventories are highest in former bubble markets. If people would seriously take the time to analyze housing stats, they would glean some intelligence that shows that the sky is not falling. But then again, if people think the best housing intelligence comes from their local auto dealer, perhaps we should start inflating giant Godzillas to convince consumers that now is a good time to buy. 
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