25 November 2008

Analyzing NAR’s Monthly Release

Yesterday the National Association of REALTORS® issued its monthly release of existing home sales.  Rather than add to the many existing articles that understandably lean towards the consumers’ perspective, we believe there are trends and statistics that aren’t being highlighted that could help practitioners in our industry plan ahead.  You may find some of what follows to be more valuable if you read our post on market cycles and if you have handy the one-page NAR data for October (found at the bottom of this article).  You can also download our analysis hereAs always, feel free to email us if you would like anything sent your way.


Sales (which will hereafter be referred to as “sides”) and price fell in October, with the decrease in sides reversing a one-month pause of what had been a thirty-month trend of year-over-year transaction sides’ declines.  This is important to note because up until October the rate of decline had been slowing throughout the year, which had lent some support that, nationally, we were moving towards a phase in which sides would be higher than prior-year, which is a sign of recovery as inventory gets worked through.

The national sales volume (determined by multiplying 418,000 sides with a mean average sales price of $224,700) for October was $93.9 billion, a 9{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} decrease from the prior month and 13{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than October ’07.  The trailing twelve-month sales volume was $1.231 trillion; the last time the figure was at this level was July ’03.  This figure is also 35{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than the peak of $1.904 trillion reached in March ’06.


This region’s figures are directionally in line with the national trends, with the important exception that the percentage decrease in average sales price has been less pronounced than nationally.  October’s results delayed any signs that the Northeast had been moving from Phase V to Phase VI.

Sales volume was $19.1 billion, a 9{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} decrease from September and 14{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than October ’07.  Trailing twelve-month sales volume was $259 billion.  This was last reached in April ’04 and represents a 26{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} decrease from the high-point of $349 billion reached in March ’06.


October sales volume in the Midwest was $16 billion, 13{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than September and 16{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than October ’07.  Trailing twelve-month sales volume was $218 billion.  This is the lowest in exactly five years and represents a 33{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} decrease from the $328 billion reached in March ’06.


At $31.5 billion, October sales volume in the South was 6{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} lower than September and 15{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than October ’07.  Trailing twelve-month sales volume was $411 billion, which nearly matches July ’03 and represents a 35{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} decrease from the May ’06 apex of $635 billion.


Although sales prices continue to drop sharply, the West represents the only region with continued support of sides’ improvement.  For the fourth straight month, sides in October were higher than the prior year’s results.  This rate has improved dramatically over the last two months; if this trend continues, the West will experience the needed inventory reduction that is critical to a recovery.

The West’s sales volume was $27.6 billion in October, a 6{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} decrease from September and a 5{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} increase over October ’07.  Trailing twelve-month sales volume was $333 billion (up over prior month for the third straight time).  This level is similar to March ’03 (yet is 43{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} lower than the November ’05 peak of $589 billion).


A simple step brokers can take is to use local board data to calculate the trailing twelve-month sales volume in their market to see how they compare to national and regional trends, and to determine when they were last at today’s levels (keeping in mind any changes in broker commission rates).  This may be helpful both to your own planning (e.g., to review how your company’s performance has stacked up against the local market) and to your messaging with agents.  Having hard data to support a statement like “we are in a 2003 environment” may be very helpful as you make decisions.  From there, calculate your forecasts for next year (you can start this process by looking at projections from either NAR of Fannie Mae).

Carefully watching the data every month helps you stay atop of the trends.  Price drops make headlines, but knowing how transaction sides and price changes move relative to prior periods will give you deeper insight into where we may be headed (especially changes in sides).

Yes, this is a lot of data to absorb but once your eyes get used to it the calculations are straight-forward yet very telling.  We believe there is great value to reviewing this on a real-time basis, so after each NAR release (usually around the 25th of each month), we will publish the statistics and our analysis here.

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