Friday, July 24, 2009

A Few Observations on Existing Home Sales

Is the rate of existing home sales stabilizing? Let's take a look. First, here is a chart of sales in a shorter time frame:

Notice that before all of the really big financial problems of last summer/fall sales had been more or less stable for about a year. Then sales dropped again to a slightly lower level. However, notice that gray lines have been increasing for three months and again appear to be stabilizing. However,

Click for larger image

What is the more normal level of home sales? Notice on the longer chart we can eyeball two areas of possible "normal" existing home sales. Which one of those areas would apply to a period of massive household de-leveraging and high unemployment? In that situation I would lean towards the lower level. But we are also now in an environment where housing is growing more and more affordable, sellers want to make deals and there is a massive tax credit for buyers. In addition, the rate of annual existing home sales has been within a fairly small range for almost two years now. Given those factors maybe its the higher level.

Housing got us in this mess and its going to take a long time to get us out. As a result, I'm reluctant to make any predictions about the housing market.

However, the tight range of sales for the last two years is cause for hope.