by Calculated Risk on 1/25/2007 03:55:00 PM

First, a couple of quotes from the NAR press release today:

“It looks like we’re moving beyond the low for the housing cycle last fall ..."
David Lereah, NAR’s chief economist, Jan 25, 2007

"... we’re looking for slow, steady gains in both home sales and prices through 2008.”
NAR President Pat Vredevoogd Combs, Jan 25, 2007

Last month economist David Berson at Fannie Mae projected existing home sales would fall to 5.925 million units in '07 (NAR reported 2006 sales at 6.48 million units today). Will sales rise in '07 as forecast by the NAR spokesmen, or will sales fall as projected by Fannie Mae economists and others?

One of the rarely told stories of the housing boom was the jump in turnover of existing homes. This graph shows sales normalized by the number of owner occupied units. This shows the extraordinary level of sales for the last few years, reaching 9.5% of owner occupied units in 2005. The median level is 6.0% for the last 35 years.

Some of the sales were for investment and second homes, but normalizing by owner occupied units probably provides a good estimate of normal turnover. If sales fall back to 6% that would about 4.6 million units. If sales fall back to the level of 1998 to 2001 (7.3% of total owner occupied units sold) that would be about 5.6 million units in 2007.

My guess is existing home sales will "surprise" to the downside, perhaps in the 5.6 to 5.8 million unit range, or approximately 7.5% of owner occupied units.

Note: from my Housing in 2007 predictions.