by Calculated Risk on 10/18/2012 08:37:00 PM

The most important numbers in the existing home sales report, to be released Friday morning, are inventory and percent conventional sales - not total sales (although that will be the focus of most of the media).

Inventory is important because this is "visible inventory" (as opposed to "shadow inventory"), and visible inventory that has the largest impact on prices. The percent of conventional sales is important because this gives a hint as to the health of the overall market.

Imagine if sales move mostly sideways for the next few years, but the number of distressed sales steadily declines. That would be a sign of an improving market.

Unfortunately I'm not very confident in the NAR methodology for estimating the percent of distressed sales. This data comes from a monthly survey for the Realtors® Confidence Index and is an unscientific sample. However the regional data Tom Lawler and I have been tracking suggests the percent of conventional sales is increasing.

In August 2012, the NAR reported "Distressed homes ... accounted for 22 percent of August sales (12 percent were foreclosures and 10 percent were short sales), down from 24 percent in July and 31 percent in August 2011" and last year, the NAR reported "Distressed homes ... accounted for 30 percent of sales in September (18 percent were foreclosures and 12 percent were short sales), down from ... 35 percent in September 2010." 

So it appears the percent of distressed sales is declining (the percent of conventional sales is increasing), and I'd expect the NAR to report distressed sales in the low 20 percent range.

Housing economist Tom Lawler estimates the NAR will report sales of 4.70 million and a monthly decline in the inventory of existing homes for sale of about 3.2% in September.

On Friday:
• At 10:00 AM, the National Association of Realtors (NAR) will releases Existing Home Sales for September. The consensus is for sales of 4.75 million on seasonally adjusted annual rate (SAAR) basis. Sales in August 2012 were 4.82 million SAAR.

• Also at 10:00 AM, the BLS will release the Regional and State Employment and Unemployment report for September 2012.


Another question for the October economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).