In August, the seasonally adjusted annual rate (SAAR) of existing home sales was 5.10 million, a decline of 2.7% from the 5.24 million pace in July, and well below the 5.35 million pace expected by the consensus of economists. However, it was a 3.4% improvement from the 4.93 million pace of a year ago.
The month-over-month decline came despite mortgage rates being slightly lower in August (5.19%) than in July (5.22%). Rates are well below the 6.48% of a year ago. The median price, which is not the best measure of home prices since it can be affected by mix shifts, fell 12.5% from a year ago to $177,700.
Existing home sales do follow a distinct seasonal pattern (as can be seen in the graph from http://www.calculatedriskblog.com/ below), so seasonal adjustment is needed. Traditionally, August is one of the most important months of the year for existing home sales. On the bright side, this is the third month in a row that sales have exceeded year ago levels.
The news was not all bad, though, as the inventory of existing homes for sale fell to 3.62 million, a very large 10.8% decline from a month ago, and 16.4% below year ago levels. That dropped the months of sales down to 8.5 from 9.3 months in July. While a welcome improvement and well below the peak of over a year, it is still well above the normal level of under six months.
Also, mortgage delinquencies have been rising much faster than foreclosures of late, meaning that banks have been slow to actually kick people out of their houses. Unless those people start paying their mortgages again, they will eventually get foreclosed upon. Those houses represent a sizable shadow inventory out there.
The sales declines were widespread and affected both single family homes and condos. Single family sales were down 2.8% on the month to an annual rate of 4.48 million from 4.61 million in July, but remain 2.5% above the year-ago level of 4.37 million. The median price of a single family house is down 12.1% over the last year to $177,500. Condo sales fell 1.6% on the month to 620,000 (SAAR) but are 10.1% above year ago levels. The median condo price was $179,300, off 15.7% from a year ago.
Regionally, the Midwest fared the worst on the month with a decline of 6.6% to a SAAR of 1.14 million, a level unchanged from a year ago. It did hold up the best on the pricing front, though, with a year-over-year decline of 10.4% to $149,900. The Northeast held up the best with a 2.2% decline on the month to a SAAR of 910,000, but that was up 5.8% from a year ago. As far as median prices were concerned, it was only marginally worse than the Midwest with a 10.5% decline. The West posted the best improvement from a year ago with a 7.4% rise to a SAAR of 1.16 million, but that was 2.7% below the July rate. It has also seen the biggest decline in median prices from a year ago at 12.2%.
The biggest region of the country, the South, posted a 3.1% monthly decline to a SAAR of 1.89 million, but is up 1.6% from a year ago. Median prices down in Dixie were down 11.0% from a year ago to $157,400. The decline this month was particularly surprising since there was still time to buy before the “first time buyer” tax credit of up to $8,000 (or 10% of the purchase price which ever is lower) expires at the end of November (see yesterday’s blog for a fuller discussion of the tax credit). People have to close on the house by 11/30 to qualify, so one would expect a flood of people trying to get in under the wire.
On an absolute, non-seasonally adjusted basis, we will probably see a sharp drop-off in home sales over the next few months. The expiration of the tax credit could exacerbate that. This report should take some of the wind out of the sales of the homebuilding stocks, many of which have risen more than four fold above their 52 week lows. Stocks like D.R. Horton (DHI), Lennar (LEN) and Beazer Homes (TBZH) could be extremely vulnerable if the New Home Sales data due out tomorrow show a similar drop. A 1.8% month-over-month gain is currently expected for New Home Sales.
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