Tuesday, March 23, 2010

Existing Home Sales Number Even More Bearish Than Headline Suggests...

The Nat'l Assoc. of Realtors reported it's existing home sales number for Feb. today and the numbers are much worse than the headline that most analysts and investors will look at.  Sales fell for the 3rd straight month down to a "seasonally adjusted" 5.02 million annual sales rate.  You can bet your gold that the number is statistically skewed to the high side.  Inventoies of existing homes for sale jumped by 10% 3.59 million, leading the normally uber-bullish NAR chief cheerleader to state:  "Yun said the January-to-February increase in inventory was much larger than usual in February. Inventories represented an 8.2-month supply at the current sales pace, the most since August."  (LINK).  Keep in mind that March/April is typically the peak listing period, so expect to see a lot more "for sale" signs in your area as homeowners either engage in "strategic default" (i.e. send their keys to the bank) and vacate or the ones who still have equity to preserve decide to sell.

Please bear in mind, that the inventory of existing homes would be substantially higher if banks were to release their foreclosed home inventory (REO - real estate owned) onto the market.  Furthermore, as per the self-imposed foreclosure moratorium by big banks during December and January, expect that the foreclosure rates will begin to spike - we're already seeing this to some extent in the numbers.  As banks let foreclosed homes pile up, expect the market will "feel" this "shadow" inventory and buyers will likely wait.  Also expect that most "frothing-at-the-mouth" buyers who jumped to take advantage of the massive taxpayer tax credit subsidy, which theoretically expires April 30, have already likely made their purchase.  Too bad for them because I expect prices to drop another 5-10% this year alone from where we are now.


  1. KB home CEO said this AM that home sales are stabilizing. That might very well be true but just look at the level of where it is stabilizing and then look at the components of sales. Not exactly encouraging, but you cannot blame home builders and realtors for showing optimism.

  2. Yes I can blast them. And I intend to go over KB's numbers and look for accounting bullshit. Sales "stabilized" slightly because of the tax credit. KB is mostly a middle market/low-end homebuilder with a 200k or lower price point. That has fed right into the first time homebuyers using the $8500 tax credit as part of their down payment.

    These numbers are abysmal.