by Calculated Risk on 11/24/2008 10:30:00 AM

Here is another way to look at existing homes sales - monthly, Not Seasonally Adjusted (NSA):

Click on graph for larger image in new window.

This graph shows NSA monthly existing home sales for 2005 through 2008. Sales were slightly lower in October 2008 than in October 2007 - after the first year-over-year increase in September 2008 since November 2005.

It might seem like sales have stabilized, however many of the sales this year are foreclosure resales. As an example, DataQuick reported that 51% of all sales in Socal in October were foreclosure resales as opposed to 16% in October 2007. This is probably boosting sales at the low end as investors buy properties to rent. Although foreclosure resales will stay elevated in 2009, I expect total sales to fall further.

Also, the impact of the most recent wave of the credit crisis is just beginning to impact home sales. I expect sales in November and December to be lower than in 2007.

There have been 4.23 million sales so far in 2008, and sales are currently on pace for just over 4.9 million total this year - the lowest annual sales since 1997.

The second graph shows inventory by month starting in 2002.

Inventory levels were flat for years (during the bubble), but started increasing at the end of 2005.

Inventory levels increased sharply in 2006 and 2007, but have only increased slightly in 2008. In fact inventory for the last three months (August, September and October 2008) are slightly below the levels of last year. This might indicate that inventory levels are close to the peak for this cycle (inventory has peaked for 2008), however there is probably a substantial shadow inventory – homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time.