Lawler: Early Look at Existing Home Sales in February

From economist Tom Lawler:

Based on reports I’ve seen so far from various state and local realtor association/board/MLS reports (and a few reports based on property records), it seems highly likely that the YOY growth rate in unadjusted existing home sales as measured by the National Association of Realtors slowed substantially in February relative to January’s reported YOY sales gain of 11.9%. Almost all areas reporting so far showed slower YOY growth in February relative to January, and several states/areas showed YOY declines (including but not limited to California, Michigan, Iowa, Minnesota, Long Island, Phoenix, Tucson, Las Vegas, and Reno). Based on what I’ve seen so far, I estimate that February existing home sales as measured by the NAR will show a YOY increase of about 4.3%. Of course, the YOY gain in seasonally adjusted sales will be higher, reflecting the lower business day count this February vs. last February (last year was a leap year). Based on my estimated seasonal factor, I expect that the NAR will report that existing home sales in February ran at a seasonally adjusted annual rate of about 4.87 million, down about 1% from January’s pace, and up about 7.7% from last February’s pace.

On the inventory front, it’s a bit challenging of late to estimate the NAR’s existing home inventory, as it hasn’t been “tracking” various trackers of overall home listings. E.g., realtor.com said that daily residential listings on realtor.com during January averaged 1,477,266, down 16.5% from last January’s average, and during February listings averaged 1,494,218, down 16.0% from last February (December showed a YOY decline of 17.3%). Zillow said that residential listings on Zillow.com on January 23, 2013 were 17.5% lower than listings on January 23, 2012, and listings on February 24, 2013 were down 16.6% from February 24, 2012. The NAR, however, estimated that the number of existing homes for sale at the end of January was 25.3% lower than the number of existing homes for sale a year earlier! And the monthly drop in the NAR’s inventory estimate for January of 4.9% substantially exceeded that of all listings trackers, as well as what local realtor/MLS reports would have suggested.

Based on listings trackers as well as the local realtor/MLS reports I’ve seen so far, I’d expect that “actual” existing home inventories increased by a modest 1% or so in February. How that will translate in the NAR’s estimate, however, is not clear: a 1% increase in the NAR’s estimate in February, combined with no revision in the January estimate, would imply an implausibly large YOY drop of 26.7%. In looking at admittedly limited historical data, however, there has been a tendency for the NAR inventory number in February to show a bigger gain than other measure, so I’m “guessing” that the NAR inventory estimate will show a monthly gain of 3% or so.

CR Note: The NAR will report February existing home sales on Thursday, March 21st. The early consensus is the NAR will report sales of 4.99 million on a seasonally adjusted annual rate (SAAR) basis.  However Lawler's analysis suggests the NAR will report sales of around 4.87 million SAAR.

Based on Lawler's estimates, the NAR will report inventory at around 1.8 million units for February, and months-of-supply around 4.4 months (up from 4.2 months in January, but still very low).