This morning, the National Association of Realtors reported that existing home sales in December fell to a seasonally adjusted annual rate (SAAR) of 4.89 million, 2.2% below November, and down 22.0% from a year ago. The report was also below consensus expectations of a SAAR of 4.95 million. Existing home sales are recorded at the close of escrow, so these numbers reflect deals being made for the most part in November.
The price of a median house was $208,400, down 6.0% from a year ago. Sales fell in all four regions with the Northeast slowing the most this month, down 4.6% for the month and 22.4% for the year. The West followed with a 2.1% decline for the month and down 24.8% year over year. Sales in the Midwest fell 1.7% for the month and are off 20.5% year over year. The South fared the best with only a 1.0% decline for the month and off 20.9% year over year.
In terms of median prices, the more expensive the region, the more prices are falling. The West is the most expensive region with a current median price of $309,800, but that is down 11.1% year over year. The Northeast follows with a median price of $258,600 which is down 8.9% from a year ago. The median price in the South was $173,400, off 4.1% from a year ago and in the Midwest the median price fell 3.9% to $159,800.
The good news is that inventories fell 7.4% to 3.91 million. That reduced the months supply figure to 9.6 months from 10.1 months in November. However, housing inventories almost always fall in December (do you really want prospective buyers touring your house on Christmas Eve?), so do not read too much into the decline in inventories. The decline was actually smaller than the average decline for December since 2001.
We are far from out of the woods in the housing market, and it is very likely that inventories will swell again in the spring. Relative to historical relationships with rent and incomes, housing prices still have about another 15-20% decline to come nationwide (more in bubble areas).
Since the surprise rate cut by the Fed, the homebuilding stocks have had an incredible rally -- 'incredible' as in 'not credible.' There have been several other sharp rallies in these stocks on the way down. If you are not out of them, get out now. If you have a strong stomach, consider shorting them. The time to buy these is after two of the following stocks have declared Chapter 11 bankruptcy (then buy the rest of them): Beazer (BZH), Lennar (LEN), D.R. Horton (DHI), Toll Brothers (TOL), Standard Pacific (SPF), Hovnanian (HOV), Centex (CTX), KB Homes (KBH), M/I Homes (MHO), Ryland (RYL) and Pulte (PHM).
