Reports and headlines say home sales increased 10.1 percent in October, up 23.5 percent from a year ago; I say up 6.6 percent for the month and almost even with last year

Dennis Norman

National Association of REALTORS Report:

According to the latest report released today from the National Association of REALTORS(R), existing home sales in October jumped 10.1 percent to a seasonally adjusted-annual rate of 6.10 million units in October from a revised level of 5.54 million in September, and are 23.5 percent higher than the 4.94 million-unit pace in October 2008. Existing home salesare now at the highest level since February 2007 when it hit 6.55 million.

My Report after digging into the numbers from the National Association of REALTORS:

According to the same NAR report I find that ACTUAL (not “seasonally adjusted”) sales did in fact increase in October to 499,000 sales up 6.6 percent from September’s 468,000 sales, but almost 35 percent less of an increase from the prior month than the headlines based upon seasonally adjusted numbers. When comparing the actual sales of October 2009 to the actual Sales of October 2008 (413,000) there was an increase of 20.8 percent which is actually not too far off from the 23.5 percent increase being reported based upon seasonally adjusted numbers.

The home-buyer tax creditplayed a major role in these positive sales numbers for September and October no doubt as buyers raced to buy a home and close on the purchase before the credit was set to expire on November 30th (on November 6th the credit was extended) so it is not surprising to see the increase. Having said that, I would not expect sales to continue at the same pace; buyers eligible for the tax credit now have until April 30,2010 to purchase a house and until June 30, 2010 to close the deal so I think the sales activity that is a result of the credits will be spread out over the period and no doubt will spike again as the deadline draws near.

So why do I say homes sales are running about the same, just slightly better, when NAR is reporting sales are up almost 24 percent from last year? Simple, it’s back to actual sales numbers versus “seasonally adjusted rates”. Through the end of October 2009 there have been 4,272,000 ACTUAL HOMES SOLD versus 4,230,000 sold through October 2008, for an increase of just under 1 percent, significantly less than the 23.5 percent increase based upon seasonally adjusted rate of sales. The problem with the seasonally adjusted numbers is when you do have an increase in sales activity in a month that it’s not expected (like September and October) it looks more significant than it may be, particularly if there are underlying factors that affected the sales (such as the tax credit). To illustrate my point, in October there were just 31,000 more homes sold than in September and yet the “seasonally adjusted annual rate of sales” increased by 560,000 homes.

I think we do have a shot at ending the year in 2009 with more existing homes sold than in 2008 but I think it will be close. As I said earlier, there have been 4.272 million homes sold this year…if November and December sales are the same as they were last year (322,000 and 361,000 respectively) then we will end the year at 4.955 homes sold or 0.8 percent higher than 2008’s sales of 4,913,000 homes. If actual sales for the two months would be six percent higher this year (which I don’t think is likely) like October was then we would end this year at 4.996 million homes sold or an increase of 1.7 percent from 2008.

Other highlights of the NAR Report:

• Median price of homes sold in October in the US was $173,100, down 1.7 percent from September’s median price of $176,000 and down 7.1 percent from October, 2008 when the price was $186,400.
  • The West region had the biggest decline in median home price from a year ago at a loss of 14.7 percent
  • The South region had the second highest one year decline in median prices at 6.3 percent.
  • The Northeast had a 2.6 percent decline in median home prices in a year.
  • The Midwest was the only region that saw prices increase from a year ago with an increase of 1.1 percent.
• Distressed sales accounted for 30 percent of all home sales in October.
• Total housing inventory at the end of October was 3,574,000 homes for a 7 month supply (based upon “seasonally adjusted rate of sale”) – by my calculations, based upon sales of 4.996 million homes for 2009, I say the supply is equal to about 8.6 months.
• All regions saw an increase in actual home sales from both the month prior as well as versus a year ago:
  • The Northeast was up 7.5 percent for the month, 24.6 percent versus a year ago.
  • The Midwest was up 0.9 percent for the month, 26.1 percent versus a year ago.
  • The South was up 9.1 percent for the month, 23.1 percent versus a year ago.
  • The Northeast was up 7.8 percent for the month, 10.0 percent versus a year ago.

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