Interest Rate Roundup

Monday, August 27, 2007

July Existing Home Sales ...

At the end of last week, we got data on the new home market in July. Sales rose modestly, while inventory for sale slipped. Now, we have the rest of the picture -- July existing home sales data from the National Association of Realtors. Here's a breakdown of the numbers:

* Sales fell 0.2% to a seasonally adjusted annual rate of 5.75 million from a revised 5.76 million SAAR in June (previously reported as 5.75 million). That was just a smidge better than economists' forecasts of a 0.9% decline to 5.7 million. July sales were down 9% from 6.32 million a year earlier, leaving them at the lowest level since November 2002.

* For sale inventory came in at 4.592 million single-family homes, condos, and co-ops. That was up 5.1% from 4.368 million in June (previously reported as 4.196 million units), and up 18.9% from 3.861 million in July 2006. It's also the highest level on record. On a months supply at current sales pace basis, inventory was 9.6 months, up from 9.1 months in June (previously reported as 8.8) and up from 7.3 a year earlier.

We have a longer history of months' supply figures in the single-family only market. Using that reading (9.2 months), we're the most oversupplied since October 1991.

* Median prices inched lower to $228,900 in July from $229,200 in June. June's figure was previously reported as $230,100. On a year-over-year basis, prices were down 0.6% from $230,200 in July 2006. Thanks to the revision to last month's data, we have now seen a record 12 months of YOY home price declines.

Forget "location, location, location." The most important factor in today's real estate market is "supply, supply, supply." We are literally swimming in an ocean of homes for sale. In fact, at 4.59 million units, we have the most raw inventory for sale in history. We're also at a cycle high of 9.6 months supply at the current sales pace.

Until we work through this extremely large inventory glut, we're not going to see any momentum in home prices. In fact, they fell for the 12th month in a row on a year-over-year basis in July. One other thing to keep in mind: These are "PC" figures -- Pre-Crunch. The mortgage credit crunch that began very late in July and picked up steam in August will likely put more downward pressure on home sales and prices this month and into the fall.


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