Today we got the latest Existing Home Sales by the NAR. Others, like Calculated Risk, have already done a great job covering this (here & here) so there’s very little for me to add. However, there are three things I want to point out:
First, I think a finer point needs to be added to this:
Sales increased sharply, and inventory decreased, so “months of supply” declined. A normal market has under 6 months of supply, so this is still high – and especially considering sales were artificially boosted by the tax credit.
It’s not just the existence of the tax credit for 1st-time homebuyers, but the threat of its expiration that drove the spike in sales. If there was no threat of expiration, we wouldn’t have seen a spike like this.
Second, this probably just has the effect of pushing sales forward from the future. Fall and winter months tend to be hibernatory for housing – just like they are for bears, squirrels, and cute little chipmunks. So seasonal trends may get distorted.
Third, drawing the conclusion that we’re seeing a housing bottom is really a non sequitur. We’ve had tons of tax credits to spur demand (an $8,000 tax credit that costs $43,000 to implement is not what I call a good idea), and there’s something that always seem to be missing from the discussion and that’s what I call churn. I define it here as a basic revenue calcualtion: price X volume. Only in this case I use the median sales price and monthly unadjusted sales figures to get my metric. What does it say?
As the chart shows, folks, we’re still skiing downhill. The trend of lower highs and lower lows is still intact and until that trend can be broken sans government incentives, no one data point will be that meaningful.