Today's news that Existing Home Sales declined to 4.55 million from 4.62 million on an annual basis must be considered in conjunction with the prevailing record low rates. But low rates are only for headlines, because in the real world most people do not qualify, as pointed out by the Financial Times.
The average rate on a new 30-year fixed-rate home loan is 3.71 per cent, according to Freddie Mac, the government-controlled mortgage financier, spurring millions of Americans to lock in record low rates. But figures from CoreLogic, a housing data provider, show 20.5m of 39m creditworthy "prime" borrowers are paying rates of more than 5 per cent while just 5.7m households are enjoying rates of less than 4 per cent.
However that timely information was not part of the NAR's press release, and when I thought that I had seen every excuse being used for sluggish home sales, the title provided yet another twist: "Existing-Home Sales Constrained by Tight Supply in May, Prices Continue to Gain."
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Furthermore and despite the decline, sales "are 9.6 percent above the 4.15 million-unit pace in May 2011." Indeed! But the chart above depicts a steady decline since December 2009, with August 2010 appearing to be -- what we call in the stock market world -- an oversold condition with a temporary rebound.
There are broad-based shortages of inventory in the lower price ranges in much of the country except the Northeast, and in the West supply is extremely tight in all price ranges except for the upper end.
Mr. Lawrence Yun, the NAR's chief economist, also added that "the slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand. The normal seasonal upturn in inventory did not occur this spring." Yet, and according to the same press release, there was a 6.6 month supply of homes for sale in May, higher than the 6.5 month supply registered in April.
Today I visited realtor.com, the official site of the National Association of Realtors, and was surprised to see that the advertised inventory consists of 4.3 million homes for sale. It's puzzling to say the least, especially since the press release stated that "total housing inventory at the end of May slipped 0.4 percent to 2.49 million existing homes available for sale." Maybe the 4.3 number is designed as an advertising gimmick, but the NAR, a widely recognized organization, cannot have it both ways.
Lastly, I visited zillow.com, clicked on "Homes," and selected "For Sale." The number printed was 3,249,441, and it sits smack in the middle of both NAR figures. The conclusion is simple: Investor beware!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
