Existing-Home Sales Decreased to 5.88 million in August

Sales will be down year-over-year for the remainder of 2021

From the NAR: Existing-Home Sales Recede 2.0% in August

Existing-home sales retreated in August, breaking two straight months of increases, according to the National Association of Realtors®. Each of the four major U.S. regions experienced declines on both a month-over-month and a year-over-year perspective.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 2.0% from July to a seasonally adjusted annual rate of 5.88 million in August. Year-over-year, sales dropped 1.5% from a year ago (5.97 million in August 2020).
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Total housing inventory at the end of August totaled 1.29 million units, down 1.5% from July's supply and down 13.4% from one year ago (1.49 million). Unsold inventory sits at a 2.6-month supply at the current sales pace, unchanged from July but down from 3.0 months in August 2020.
emphasis added

The sales rate was slightly above the consensus forecast.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in August (5.88 million SAAR) were down 2.0% from last month, and were 1.5% below the August 2020 sales rate.

Existing home sales are somewhat above pre-pandemic levels rate of around 5.5 million SAAR (average six months prior to pandemic).  

Some of the increase in sales since the beginning of the pandemic was probably related to  record low mortgage rates, strong second home buying, a strong stock market and favorable demographics.

Also, the delay in the 2020 buying season pushed the seasonally adjusted number to very high levels over the winter.   This means there are going to be some difficult comparisons in the last several months of 2021!

The second graph shows existing home sales by month for 2020 and 2021.

This was the first month this year with sales down year-over-year. This should continue through the rest of the year, since sales averaged 6.6 million SAAR over the last four months of 2020.

The third graph shows existing home sales for each month, Not Seasonally Adjusted (NSA), since 2005.

Sales NSA in August (576,000) were 2.9% above sales in August 2020 (560,000).   This was the highest sales rate NSA for August since 2006.

There were more selling days in August 2021 than in August 2020, so the SA numbers were lower than last year, even though the NSA numbers were higher.

The fourth graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 1.29 million in August from 1.31 million in July.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The fifth graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory is very low, and was down 13.4% year-over-year (YoY) in August.  Also, as housing economist Tom Lawler has noted, the local MLS data shows even a larger decline in active inventory (the NAR appears to include some pending sales in inventory). Lawler noted:

"As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for many of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months."

It seems likely that active inventory is down close to 25% year-over-year.

Months-of-supply at 2.6 months is still very low, but above the record low of 1.9 months set in December 2020 and January 2021.  Inventory will be important to watch in 2021, see: Some thoughts on Housing Inventory

It is likely inventory will be up year-over-year sometime during the Winter months, but inventory will still be at very low levels.

Finally, as usual, housing economist Tom Lawler's forecast was closer to the NAR report than the Consensus. The NAR reported 5.88 million SAAR, Lawler estimated the NAR would report 5.90 million SAAR, and the consensus was 5.81 million SAAR.

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