Inventory, Inventory, Inventory

The NAR is scheduled to report July existing home sales on Wednesday. The consensus is for sales of 5.13 million on seasonally adjusted annual rate (SAAR) basis. However economist Tom Lawler is estimating the NAR will report a July sales rate of 5.33 million.  So it is likely that the NAR will report above consensus sales.

However I wouldn't read too much into an above consensus report.  I suspect some people pushed to close in July before their mortgage rate "lock" expired, and my very early guess is existing home sales will decline in August.

Of course what really matters in the NAR report is inventory and months-of-supply.  It is mostly visible inventory that impacts prices, and it appears inventory bottomed earlier this year.

Watching inventory during the bubble helped me call the top of the housing market.   And watching inventory decline helped me call the bottom for prices (see Feb 2012: The Housing Bottom is Here), and now inventory is suggesting price increases will slow.   Below is a table of the year-over-year change in inventory since January 2012.  Notice that the year-over-year change will probably turn positive soon.  Inventory is still very low, but this will be a key change to watch.

Year-over-year Change in Inventory
	YoY % Change
Jan-12	-19.9%
Feb-12	-20.3%
Mar-12	-23.4%
Apr-12	-21.9%
May-12	-21.1%
Jun-12	-25.0%
Jul-12	-23.8%
Aug-12	-20.5%
Sep-12	-25.2%
Oct-12	-23.0%
Nov-12	-24.0%
Dec-12	-21.1%
Jan-13	-24.0%
Feb-13	-20.8%
Mar-13	-16.8%
Apr-13	-14.0%
May-13	-13.0%
Jun-13	-7.6%
Jul-13

Tuesday:
• At 8:30 AM ET, the Chicago Fed National Activity Index for July will be released. This is a composite index of other data.