Interest Rate Roundup

Friday, May 25, 2007

April Existing home sales sink to an almost 4-year low; Inventory rises to a record

We just got our second report on the state of the housing market in April -- existing home sales. Here's the data, with my take on what the numbers mean:

* Existing home sales dropped 2.6% to a seasonally adjusted annual rate of 5.99 million from a revised 6.15 million SAAR of sales in March. That's the lowest reading since June 2003. Economists expected sales to dip an ever-so-slight 0.1% from an originally reported 6.12 million in March. On a year-over-year basis, home sales dropped 10.7% from the April 2006 SAAR of 6.71 million.

Regionally, sales fell in all four quarters of the country, with the Northeast leading the way at -8.8% on the month. Single-family sales dipped 2.4%, while condo and co-op sales dropped 3.8%.

* On the inventory front, there were 4.2 million existing homes for sale as of last month. That was up a hefty 10.4% from 3.806 million in March and up 23% from 3.415 million units in April 2006. On a months supply at current sales pace basis, we had 8.4 months of inventory. That was up from 7.4 in March, and up from 6.1 in April 2006.

It's worth noting that single-family inventory (on a months supply basis) is now the highest since 1992. The raw number of SFH for sale is the highest on record (I've included a chart from Bloomberg showing the raw numbers going back to 1989).

* Median prices climbed 1.6% month-over-month to $220,900 from $217,400 in March. But prices fell again year-over-year -- by 0.8% from last April's reading of $222,600.

Existing home sales put in a poor showing last month. Sales fell by a larger margin than expected and prices extended their losing streak to a record nine months. Most importantly, the supply glut got worse. Raw inventory of homes for sale surged 10% in just one month while the months supply indicator blew out to 8.4 months. Both readings are a cycle high.

The bottom line: We're swimming in supply. Unrealistic sellers. Stuck flippers. Stretched borrowers. Foreclosures. They're all contributing to a surge in homes on the market. Until sellers get realistic and start cutting prices aggressively -- like the new home builders clearly are -- the market will remain oversupplied. That, in turn, will keep the pressure on sellers and give buyers the upper hand.


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