Existing Home Sales Drop; Inventory Build Continues

Here's a link to the report

Existing home sales decreased 4.3% from July to August and 12.8% year-over-year.

Total inventory increased .4% from July and 19.2% year-over-year.

Months of supply increased 5.3% from July and 37% year-over year.

Median price decreased 1.83% year-0ver-year but increased .2% from last month. The median price hasn't jibed with the Case Shiller index for some time.

Here is a chart of total inventory



And months supply



Total inventory is higher, but marginally from last month. The main reason for the increase in months of supply is the decrease in sales this month.

However, this report still isn't that good. Inventory stands at an all time high and there's a ton of inventory available at the current sales rate. This is occurring when there's a tightening credit market. Combine all of these factors and it's pretty obvious the housing market isn't anywhere near a bottom.

Existing Home Sales Drop .2%

From Bloomberg:

Sales of previously owned homes in the U.S. fell in July for a fifth consecutive month, adding to the inventory of unsold properties and showing the housing slump that triggered a collapse in credit markets will drag on.

Purchases declined 0.2 percent, less than forecast, to an annual rate of 5.75 million, from 5.76 million in June, the National Association of Realtors said today in Washington. That was the slowest pace since November 2002. Sales dropped 9 percent compared with a year earlier.

Here's a link to the data.

Here's the only part of the release that matters. It's a chart of the absolute inventory figures.



These figures are 18.9% higher than last year and represent a 9.6 months of supply.

That is called a glut.

Existing Home Sales Increase .6%

From the National Association of Realtors

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 0.6 percent to a seasonally adjusted annual rate of 6.28 million units in November from a level of 6.24 million in October, but were 10.7 percent below the 7.03 million-unit pace in November 2005.

The median price of home sales decreased $1,000 to $218,000 and is down 3.1% YOY.

The average price increased to $1,000 to $265,000 and is down 1.8% YOY.

Inventory dropped to a 7.3 month supply while the YOY increase in inventory is 30.6%.

The big reason for the increase was a 6% jump in the Northeast sales. This is the smallest region sales wise. All other regions were either up slightly (the West was up .8%) unchanged (the Midwest) or down (the South -1.8%).

So -- inventory is still very high and the reason for the increase was a jump in sales in the smallest real estate region in the country.

In other words, this report looks fair but still raises three concerns.

1.) There is still a ton of inventory on the market in a declining YOY sales environment. That means the inventory will be there awhile. So the possibility of a price drop still remains.

2.) Without the NE increase (which I am guessing is partly due to an unseasonably warm winter and is the smallest region in the country by size of sales), this report would have been negative. The next report will indicate how sustainable this increase is but I have some doubts.

3.) The YOY price change is dropping and the median price has dropped each month since July. In other words, prices have no stabilized, although the rate of the median decrease has slowed. So long as prices are dropping and have not stabilized for a few months, calling an absolute bottom in the housing market is probably premature.

Overall, however, this report will give plenty of ammunition to pundits calling the housing market decline over.