Existing Homes Sales are Up-But Realtors are Still Down

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Today's existing home sales reportshould have had analysts, experts, economists, and Realtors dancing in the streets.

Sales were higher than expected, prices respectably up, but then there was that sticky inventory number that seemed to befuddle the Realtors' chief economist Lawrence Yun:

"The latest inventory increase is somewhat puzzling, because I had anticipated it steadily declining," he said in an interview following the monthly presser.

And then all the analysts reports came flooding in, which included the following adjectives:

  • "Troubling"
  • "Concerning"
  • "Not healthy"
  • "Not meaningful"

I think this, from Credit-Suisse's Dan Oppenheim, really sums it up:

"Total months’ supply increased to 8.4 from 8.1 in March, driven by an 11.5% increase in absolute inventories. This reflects a larger increase than the typical 6% rise in inventories from March-April, as we think people listed more homes for sale in anticipation of tax credit demand and foreclosures continued to come on to the market. However, we think inventories are likely even higher, as the NAR does not fully capture total foreclosure levels."

I didn't need a report to tell me; I see more "For Sale" signs in DC/Maryland neighborhoods today than I have in years. Granted our local economy is stronger than most. Interestingly though, these are not bank-owned homes and they're not starter homes for first time buyers. I'm guessing these are sellers who have decided that the market, around here at least, has hit bottom.

The concern of course, nationally, is that all the positive numbers we're looking at today, that is sales and prices, are all heavily influenced by the already-expired tax credit. The only number not under that spell is inventory, and that's the one that went the wrong direction.

"I can tell you exactly why the data shows an inventory increase," real estate broker Frank Borges Llosa writes to me. "Sure there were some more buyers before the tax credit, but the interesting story was the flood of SELLERS trying to take advantage of the buyers trying to buy before the expiration. One of my agents that normally does one home a week, had five right before the tax deadline."

But we also saw sales in the West, much of which is California, fall despite the tax credit.

"The figure that puzzles are sales in the West, where sales soared just before the first tax credit expired, but have hardly responded to the second tax credit," writes Patrick Newport at IHS Global Insight.

I think part of that puzzle is that so much of California's sales over the past year were driven by investors...investors who would not be eligible for the home buyer tax credit.

Remember, the existing home sales report is based on closings, not contract signings, so you will see these elevated sales numbers through June, still juiced by the credit. After that, most are expecting a drop off, and given the high inventories, that will put pressure back on home prices.

Questions? Comments? RealtyCheck@cnbc.com