Wednesday, June 24, 2009

Home sales gaining slightly

The existing home sales report for May just came out. Here’s what the figures showed:

  • Existing home sales gained 2.4% to a seasonally adjusted annual rate of 4.77 million units from 4.66 million in April. That was slightly below forecasts for a reading of 4.82 million and down 3.6% from 4.95 million a year earlier.
  • Single-family sales climbed 1.9%, while condo and cooperative sales rose 6.1%. Regionally, sales were mixed. They rose 3.9% in the Northeast and 9% in the Midwest. But transaction volume was unchanged in the South and down 0.9% in the West.
  • The raw number of homes for sale fell 3.5% to 3.798 million units from 3.937 million in April. That was also down 15.3% from a year earlier. The months supply at current sales pace indicator of inventory dropped to 9.6 from 10.1, with single family inventory falling to 9 from 9.5 and condo inventory slipping to 15 from 15.4.
  • The median price of an existing home rose 3.8% to $173,000 from $166,600 in April. That was down 16.8% from $207,900 in the year-ago period.
We saw another month of modest improvement in the housing sector in May. Existing home sales rose, led by the Midwest region. Sales were particularly strong in the condo sector, while the supply of homes on the market dipped. The biggest fly in the ointment continues to be pricing. It remains weak, with yet another double-digit decline from year-earlier levels showing up in the data.

Stepping back for a moment and looking at the big picture, it’s clear that the housing sector is no longer in freefall. But neither is it rebounding strongly. We’re seeing modest declines in inventory, modest improvement in sales, and some tentative signs of stabilization in pricing. But that’s it. And that should come as no surprise. We just experienced the longest, largest housing bubble in U.S. history. As a result, the recovery process will be a long, drawn-out affair.

Another thing to keep an eye on: Mortgage rates. They didn’t begin to rise significantly until late May. Since the existing home sales figures are based on contract closings, rather than contract signings, the impact of higher rates wasn’t captured in this report. We’ll likely see housing demand trail off as we head deeper into the summer unless financing costs ease back.
WASHINGTON (Dow Jones) -- Existing-home sales improved again in May, but falling prices and bloated supply promise to make a housing sector recovery slow.
From Mark Perry: That's one way to look at it. Here are some alternative views:

1. The April to May increases in median home prices (3.84%) and mean home prices (3.26%) were the largest monthly price increases in more than a year (data here).

2. The monthly May increase in both median home prices (3.84%) and homes sold (2.36%) was only the second time in at least a year that both prices and unit sales increased in the same month.

3. The back-to-back increase in home sales in both April and May is the first time in at least a year of two consecutive monthly increases.

4. The most recent two-month increase in sales of 4.84% is the largest since April 2004 (source).

5. The 9.6 months supply of inventory in May is below last year's May level of 10.9 months by more than five weeks, and is at the second-lowest level in the last year.

According to Brian Wesbury and Bob Stein:
The data today are consistent with our outlook that the economy is recovering from a panic.
Home sales, building activity, and the rate of decline in home prices all seem to be bottoming or have already formed a bottom. In fact, the level of existing home sales in May was the highest since October 2008.
The new home sales figures for May were also released this morning. Here’s a recap …
  • New home sales dipped 0.6% to a seasonally adjusted annual rate of 342,000 from 344,000 in April. The numbers are a disappointment, considering economists were expecting sales of 360,000. Results for the past few months were also downwardly revised by 32,000 units.
  • Regionally, sales jumped 28.6% in the Northeast and 18.6% in the Midwest. They inched up 1.3% in the west, but fell 8.5% in the South, the nation’s largest new home market (184,000 units sold at a seasonally adjusted annual rate vs. 80,000 in the West … 51,000 in the Midwest … and 27,000 in the Northeast).
  • The raw number of homes for sale continued to decline, falling to 292,000 from 299,000 in April. That’s the lowest reading going back to March 2001. The months supply at current sales pace indicator of inventory dipped to 10.2 from 10.4.
  • The median price of a new home rose 4.2% last month to $221,600 from $212,600 in April. On a year-over-year basis, prices were down 3.4%, the best YOY showing since December.
Digging into the May new home sales figures, you see that sales rose in three out of four regions of the country. But they declined sharply in the South, the country’s biggest new home market, so overall sales were a disappointment. On the other hand, for-sale inventory continues to decline — a definite plus. And the year-over-year rate of home price depreciation eased markedly.

Overall, the story remains the same: The housing market is gradually stabilizing, but showing no sign whatsoever of a vigorous rebound. The biggest issues going forward remain unemployment and interest rates. The supply of new homes for sale is back in line with the long-term historical average. But if potential buyers are losing their jobs, and financing costs are going up, builders are going to have a tough time moving product.

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