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Lawler: Early Read on Existing Home Sales in May


From economist Tom Lawler:

Based on local realtor/MLS reports I’ve seen so far, I estimate that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of about 4.66 million, up 0.9% from April’s pace and up 12.3% from last May’s SA pace. For folks watching unadjusted data, May’s YOY sales gain almost certainly exceeded April’s by a far amount. However, this April’s seasonal factor was lower than last year’s (meaning SA sales YOY rose by more than NSA sales), while this May’s seasonal factor (due mainly to a higher business day count) will be higher than last May’s (meaning SA sales YOY will rise by less than NSA sales).

On the inventory side, various reports tracking listings across metro areas across the country suggest that the inventory of existing homes for sale in May were up 1-2% on the month and down 20-22%from a year ago. However, NAR inventory data month to month don’t track these “listings” reports very closely, with the monthly “differences” having a distinct seasonal component. (Every April, e.g., the NAR’s inventory number shows a much larger gain than folks who track listings.)

My “best guess” is that the NAR’s inventory estimate in May will be down about 20.8% from last May. That would imply an estimate of about 2.48 million, which would be down 2.4% from April. Of course, the inventory of existing homes for sale did not really decline 2.4% from April to May, just as the inventory didn’t increase 9.5% from March to April. But listings data seem to track NAR data best if one looks at YOY data, and ignore the strange monthly “quirks” in the NAR estimates.

On median sales prices, my “best guess” using regional data and a sales-weighting scheme is that the median existing SF home sales price this May will be up about 6.6% from last May. However, I should note that last month I was only looking for a YOY increase of 5.5%, and NAR’s report showed a 10.4% YOY increase. After getting in more local data, for the life of me I can’t figure out how the NAR’s number came in so high last month. The regional data were even wackier, with the 10.9% YOY increase in the median SF sales price in the Northeast looking almost inconceivable given reported YOY increases in the various states in the Northeast. I say “almost” because the “mix” of sales can produce “strange” results, but my gut is that the NAR’s number was … well, simply wrong (would not be the first time!)

CR Note: The NAR is scheduled to release their May existing home sales report next Thursday, June 21st. The consensus forecast is for sales of 4.57 million (seasonally adjusted annual rate).

Based on Lawler’s estimate of 4.66 million SAAR and inventory at 2.48 million, months-of-supply would decline to 6.4 months from 6.6 months in April. That would be the lowest months-of-supply for May since 2005.

Calculated Risk

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