Existing home sales, activity is up but still slow

As measured by the number of closed transactions, the pace of existing home sales has slowed significantly over the past five years or so. The chart below clearly illustrates how sales first slowed down in the four years beginning in 2006 and by even more around mid-2011. The latest data are for January 2012, released with the S&P/Case-Shiller Home Price Indices on March 27th.

S&P/Case-Shiller Home Price Sales Pairs. Sources: S&P Indices and Fiserv.

The volatility of the lines is due to the seasonal pattern of the housing market. For both the 10- and 20-City Composites, sales volume peak around August of each year (the high points of each line, each year) and are at their lowest around February (the low points).

From 2000 until the mid-2006 market peak, the 10-City Composite January sales pairs ranged from about 50,000 to 80,000 and the 20-City Composite from about 80,000 to 130,000. Once the market collapsed, we saw the 2008-2012 January transaction volumes fall to about 35,000-45,000 for the 10-City Composite and 65,000-75,000 for the 20-City Composite. January 2012 reported 34,285 sales pairs for the 10-City Composite and 63,635 for the 20-City Composite, still well below the rates of the first half of the previous decade.

Existing home sales reported by the National Association of Realtors show the same pattern.

U.S. Existing Home Sales. Sources: National Association of Realtors

Beginning in 2000 existing home sales rose from about 4.5 million to their late-2005 peak of 6.34 million (these data are seasonally-adjusted at annual rates). Once the market turned, sales volume fell back to a level of about 4.0 million in late 2008. From there, sales rose through 2009, largely due to the homebuyers’ tax credit. As of February 2012, existing home sales are about 4.1 million, which is a bit above their average of the prior two years. Existing home sales have been steadily increasing since the summer of 2011, but the 4.1 million annual rate is about the same rate seen in 1997, and far below what the housing market experienced during its 2000-2006 run-up.

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