Interest Rate Roundup

Wednesday, October 24, 2007

September existing home sales tank

The National Association of Realtors just released its September existing home sales data. These figures reflect the fallout from the credit turmoil we've seen in the mortgage market. The full details:

* Sales tanked 8% to a seasonally adjusted annual rate of 5.04 million from 5.48 million in August (previously reported as 5.5 million). That was much worse than economists' forecasts for a 4.5% decline to 5.25 million. The September sales rate was down 19.1% from 6.23 million in September 2006 and the lowest level since the Realtors' group started tracking sales of all property types combined (single-family homes, condos and co-ops) in the late 1990s.

We have a longer data series on single-family only sales. Those sales came in at 4.38 million, the lowest since January 1998 (4.18 million), as shown in the chart above.

* For sale inventory came in at 4.399 million single-family homes, condos, and co-ops. That was up slightly from 4.383 million in August (previously reported as 4.581 million units), and up 16.3% from 3.783 million in September 2006.

Single-family only inventory is running at 3.708 million. That's about 1.5 million to 2 million more units than was common in the 1990s and early 2000s, and almost 700,000 more units than we had listed at the previous peak in the 1980s (3.04 million in April 1986).

* On a months supply at current sales pace basis, inventory was 10.5 months, up from 9.6 months in August (previously reported as 10), up from 7.3 a year earlier, and the worst on record. Using single-family only data, we have 10.2 months of supply, the most since February 1988 (10.3 months).

* Median prices fell a sharp 5.7% to $211,700 in September from $224,400 in August (August's figure was previously reported as $224,500). On a year-over-year basis, prices were off 4.2% from $220,900 in September 2006. That is the worst YOY drop since October 2006 (-4.3%).

My take:

We didn't have to wait until Halloween to get ghoulish housing numbers. September's sales, inventory, and pricing data were enough to spook even the most ardent housing bull. Sales fell much more than expected, prices dropped sharply, and inventory remained extremely high.

The forces driving the housing market lower are clear: Buyer confidence is falling, lending standards are tightening and housing prices are still out of line with underlying incomes in many U.S. markets. The credit markets have stabilized somewhat since this summer, and the Federal Reserve has clearly shifted into easing mode. That could ameliorate the pain somewhat in coming months. But I don't expect to see a real, lasting rebound in housing until late 2008 or sometime in 2009.


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