Lawler: Early Look at Existing Home Sales in July

From housing economist Tom Lawler:

Based on local realtor association/board/MLS reports I have seen across the country, I estimate that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.33 million in July, up 4.9% from June’s disappointing pace.

Local data indicate that existing home sales on an unadjusted basis almost certainly showed substantially faster YOY growth in July than in June. Some acceleration was to be expected, as there were more business days this July than last July, while there were fewer business days this June than last June. However, most regional home sales reports showed YOY growth rates well in excess of any “business-day” effects.

On the inventory front, the vast bulk of realtor reports showed a monthly gain in listings. Other “listings trackers” also point to a monthly increase in the number of homes for sale. While NAR inventory estimates don’t always match reported changes in listings, I estimate that the NAR’s estimate of the inventory of existing home sales in July will be 2.26 million, up 3.2% from June and down 5.8% from last July.

It is worth noting that a faster home sales pace in July does not mean that the jump in mortgage rates has had little or no effect on home sales. Existing home sales are closed sales, and many folks who settled in July locked in rates a few months ago. In addition, there is evidence that when interest rates first started moving higher – just not by a boatload – there was an increase in contracted sales reflecting home buyers’ fears of rates rising further. And, some closings may have been accelerated to beat rate-lock expirations.

CR Note: The NAR is scheduled to report July existing home sales on Wednesday, August 21st.

Based on Tom's estimates of a 5.33 million sales rate, and inventory at around 2.26 million for July, and months-of-supply around 5.1 (down from 5.2 months in June). This would still be a very low level of inventory - probably the lowest for July since 2002 or so - also a 5.8% year-over-year decline in inventory would be the smallest year-over-year decline since early 2011 (when inventory started to decline sharply).  Note: In June, inventory was down 7.6% compared to June 2012.   These smaller year-over-year declines suggest inventory bottomed earlier this year.

Note: Housing economist Tom Lawler has been sending me his predictions of what the NAR will report for 3 years.  The table below shows the consensus for each month, Lawler's predictions, and the NAR's initial reported level of sales. 

Usually when there has been a fairly large spread between Lawler's estimate and the "consensus", Lawler has been closer (the "consensus" for July is 5.13 million) . 

Note: The consensus average miss was 170 thousand with a standard deviation of 190 thousand.  Lawler's average miss was 70 thousand with a standard deviation of 50 thousand.

Existing Home Sales, Forecasts and NAR Report millions, seasonally adjusted annual rate basis (SAAR)
Month	Consensus	Lawler	NAR reported1
May-10	6.20	5.83	5.66
Jun-10	5.30	5.30	5.37
Jul-10	4.66	3.95	3.83
Aug-10	4.10	4.10	4.13
Sep-10	4.30	4.50	4.53
Oct-10	4.50	4.46	4.43
Nov-10	4.85	4.61	4.68
Dec-10	4.90	5.13	5.28
Jan-11	5.20	5.17	5.36
Feb-11	5.15	5.00	4.88
Mar-11	5.00	5.08	5.10
Apr-11	5.20	NA	5.05
May-11	4.75	4.80	4.81
Jun-11	4.90	4.71	4.77
Jul-11	4.92	4.69	4.67
Aug-11	4.75	4.92	5.03
Sep-11	4.93	4.83	4.91
Oct-11	4.80	4.86	4.97
Nov-11	5.08	4.40	4.42
Dec-11	4.60	4.64	4.61
Jan-12	4.69	4.66	4.57
Feb-12	4.61	4.63	4.59
Mar-12	4.62	4.59	4.48
Apr-12	4.66	4.53	4.62
May-12	4.57	4.66	4.55
Jun-12	4.65	4.56	4.37
Jul-12	4.50	4.47	4.47
Aug-12	4.55	4.87	4.82
Sep-12	4.75	4.70	4.75
Oct-12	4.74	4.84	4.79
Nov-12	4.90	5.10	5.04
Dec-12	5.10	4.97	4.94
Jan-13	4.90	4.94	4.92
Feb-13	5.01	4.87	4.98
Mar-13	5.03	4.89	4.92
Apr-13	4.92	5.03	4.97
May-13	5.00	5.20	5.18
Jun-13	5.27	4.99	5.08
Jul-13	5.13	5.33	---
1NAR initially reported before revisions.