There was worrisome news today in the report from the National Association of Realtors on October sales of existing homes. But the scary part wasn't where you would think to look first.
Sales were down slightly more than economists' expectations, yes, falling 2.7% from September's pace to an annual rate of 7.09 million. But they were still 3.7% above the level of October 2004.
Prices weren't the problem, either. The national median existing-home price for all housing types (including townhouses, codos and c-ops) was $218,000, up nearly 17% from a year ago. That's a huge increase--the biggest year-over-year jump since the high-inflation days of July 1979.
The real warning sign in the Realtors' report was the increase in existing homes available for sale--up 3.5% to 2.87 million, which is a 4.9-month supply at the current sales pace.
What that means is that even though people are buying homes at a near-record pace, it's still not enough to keep up with the number that are coming onto the market.
Realtors President Thomas S. Stevens gave an optimistic interpretation to the inventory jump, saying in a press release that "the rise in inventory means that buyers will have a wider choice available to them."
But as any business person knows, swelling inventories can be a sign of trouble ahead. Action Economics points out that the inventory of homes available for sale is the highest since 1986.
As Ian Shepherdson of High Frequency Economics observes today, there are now 14.4% more existing homes for sale than there were a year ago, while actual sales are up just 3.3%.
Merrill Lynch chief North American economist David Rosenberg says today that "we think it's pretty safe to say that the housing boom is over."