Zacks.com: Analyst Blog

The bad news on existing home sales just keeps coming.  In October, the seasonally adjusted annual rate nationwide fell below the 5.0 million mark for the first time this century.  It was down 1.2% from September, which in turn was down 8.2% from August. Nationwide sales were down 20.7%.  Both months came in weaker than consensus expectations. 

Regionally, on a month-to-month basis, both the Northeast and the South were unchanged from September, following sharp drops (10.0% and 6.9%, respectively) the month before.  On a year-over-year basis, they were down 12.6% and 19.4%, respectively.  The Midwest was down 1.7% in October following a 6.3% decline in September.  On a year-over-year basis it was down 16.9%.  Worst-hit this month was the West -- down 4.4% following a 9.9% drop the month before.  On a year-over-year basis, sales in the West are down 33.1%. 

While sales were dropping, inventories nationwide rose by 1.9% for the month and up 15.4% year over year.  That puts the month's supply number at 10.8 months, up from 10.4 months in September.  That is a staggering 45.9% increase over the 7.4 months worth of inventory in October 2006. 

While inventories may drop next month since seasonally many homeowners will pull their houses off the market during the holiday season, any improvement there is likely to be temporary.  We would not be surprised to see the months of supply number cross the one-year mark early in 2008. 

As bad as the volume and inventory numbers were in October, the news on the price front was worse.  Nationwide, the price of a median existing home is now down 5.1% on a year-over-year basis, with three of the regions down and only the Northeast holding up on a year-over-year basis. 

Prices had been holding up, but the dam looks like it has broken.  Since August the price of a median home is down 7.4%.  We would contend that this process still has a long way to go.