US Existing Home Sales Will be Below Estimates

The NAR is scheduled to report June existing home sales tomorrow and the Bloomberg consensus is expecting 5.25 million units up 1.4% from May.

 

Yet, according to my friend, Christophe Barraud, Chief Economist and Strategist at Market Securities and also the best forecaster of US statistics since November, existing home sales should fall sharply in June:

 

According to my estimate, in order for the sales in adjusted value to be stable from May to June, that is to say around 5 180 K – raw data should rise 12.7% from June 2012 to June 2013. Nevertheless, local data that I gathered show a rise of 8.8%. Indeed, even if existing home sales increased in some states like Washington (17.8%), they decreased significantly in some regions like Arizona (-10.8%). Finally, we get a seasonally adjusted statistics of 5 000 K which represents a 3.5% drop MoM.

 

This forecast is coherent with articles which show that sales fell YoY in some regions and therefore were far below the +12.7% threshold needed to stabilize sales in June:
 
- Iowa (-7.3% YoY)
 
- Rochester Area (-4.1% YoY)
 
- Bay Area (-6.0% YoY – lowest since August 2007)
 
- Las Vegas (-7.8% YoY)
 
- Orlando (-1.9% YoY)
 
I believe that this weak figures could be explained by two main factors:
 
1/ In May, sales were boosted by a milder climate which helped to compensate the difficult conditions recorded since the beginning of the year. So, in June, sales could return to the normal pace around 5.00 million.
 
2/ The recent tensions in mortgage rate pushed transactions higher (more sellers and buyers) in May but the continuing rise (+67 bp in May, +29 bp in June) weighted on buyers.