Existing Home Sales: Read Between the Numbers

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There's an awful lot of it in today's report on September existing home salesfrom the National Association of Realtors.

Even the markets could hear the noise, as they didn't react all that much to the 10 percent jump in sales that completely beat expectations.

Yes, it was the biggest monthly gain in 28 years, but it was also the third worst sales month on record. This was thanks to the historic plunge in home sales in July, after what we first thought was the closing deadline for the home buyer tax credit.

September's data still has government stimulus in it, as it's showing the final closings from the tax credit. Thirty-two percent of home buyers in September were first timers and a whopping 29% paid in cash, which really gives you an idea of where the mortgage market is today. Sales were still 19 percent below September of 2009 levels, so that tempers the big gain as well. The median sales price also fell 2.4 percent year over year and is the lowest reading since March.

"Bottom line, the data is an improvement off a very depressed level." -Miller Tabak, Peter Boockvar

Even before today's number was released, analyst Mark Hanson predicted exactly what would happen:

"On a month over month basis, sales did not fall as much as usual due to tax-credit effects. The seasonal adjustments, which are minimal at best in September, and if accurate would have subtracted sales...Seasonally adjusting stimulus months has produced many a month of artificially high headline prints, which always lead to disappointment. And next month is no different. Due to the Sept. tax credit micro boost and Mortgage-Gate — the latter which jammed up the REO flow and kept 10s of thousands of foreclosure-related sales and short sales occurring — we will get a plunge, perhaps the likes of July."

If you take out the seasonal adjustments in September, there were actually 35,000 fewer home sales in September than August, or a 8.5 percent drop. We always use the seasonally adjusted numbers, because home selling is a very seasonal business, but you can't ignore the raw stats on this one. The most important number in this report, however, is that 35 percent of all sales in September were of "distressed" properties, or foreclosures and short sales. We all know a huge chunk of that goes away in October, thanks to the foreclosure servicing issues and resulting moratoria.

In a speech today before a conference on the future of housing finance, Fed Chairman Ben Bernanke saidthe Fed "is evaluating potential effects of these [foreclosure servicing] problems on the real estate market and financial institutions."

I think the answer to that is in today's home sales report. The housing market is looking at a rough road.

"Bottom line, the data is an improvement off a very depressed level," notes Peter Boockvar of Miller Tabak. "But with the robosigner, foreclosure moratorium taking center stage at the very end of September, which today's figure didn't capture and neither will Oct (this number measures closings), the figures towards year-end will look much different."

Questions? Comments? RealtyCheck@cnbc.com And follow me on Twitter @Diana_Olick