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By New_Deal_democrat July 23, 2014 8:14 am
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Existing home sales: sales on cusp of turning positive YoY, prices negative

Yesterday's report of existing home sales is in line with what I've laid out as the sequence in which the housing market turns:

 

  • first, interest rates turn
  • second, sales turn
  • third, prices turn  
  • finally, inventory turns
After rising by 1.6% over a year ago, interest rates have drifted lower by about 0.4% since the beginning of 2014, and are now slightly lower YoY.
 
Below are two graphs measuring YoY% changes.  The first begins in 2004.  Existing home sales are in blue, median prices in red, and inventory in green:
 
 
Note that sales turned down first, followed by prices, and finally inventory.  The upturn after the Great Recession follows the same order.
 
The second graph is begins in January 2012 to more clearly show the present:
 
 
Sales turned negative YoY about 9 months ago.  Price increases have decelerated but haven't turned negative yet.  Inventory is still increasing.
 
Because mortgage rates have declined YoY, I expect sales to turn positive YoY shortly.   Prices may have already made a short term peak, although that is impossible to tell since they are not seasonally adjusted.  I expect them to turn negative YoY in the next few months.  I expect inventory to continue to rise, which is one reason prices will probably turn negative.
 
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