December Analysis of NAR and FNMA Releases

Last week, Fannie Mae released its Economics & Mortgage Market Analysis.   This morning the National Association of REALTORS® released its November summary of existing home sales(“EHS”).  The reports themselves have data and analysis aplenty; our goal here is simply to highlight a few key facts that we feel are hidden within these reports for the benefit of those in the industry, with a specific focus on what has changed in each of their EHS analyses since their prior monthly releases.  To key in on what each report brings to the table that the other does not, we’ll concentrate on NAR’s regional results and FNMA’s outlook for 2009 and 2010.  Our complete NAR analysis can be viewed and downloaded from here.



Clearly, today’s release will likely dampen many holiday spirits.  Let’s take emotion completely out of this and focus on the facts.  You may wish to read our earlier post on market cycles to get our views on what figures we spend the most time studying.


The number of sales (also known as “sides”) fell considerably in November after two months in which sides were relatively flat to the prior year.  The average price continues to fall (the sixteenth month in a row nationally) with the rate of decline increasing.

The trailing twelve-month national sales volume (determined by multiplying total sides over the last twelve months by the mean average sales price) was $1.205 trillion.  This is 37{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than the peak of $1.904 trillion reached in March ’06.


As has been the case in the recent past, the Northeast is generally in line with the national trend but less severely so, especially as it relates to sales price.  The trailing twelve-month (“LTM”) sales volume was $254 billion, down 2{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from last month and 27{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} off its peak ($349 billion, March ’06).


Transaction sides in the Midwest were down 23{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from November ’07; mean sales price was down 12{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c}.  This combined to drop the month’s sales volume by 32{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from the prior November, the single toughest month for this region during this down market.  LTM sales volume was $212 billion (35{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} off its high-point, reached in March ’06).


Sides were down 24{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} compared to November ’07; price, 11{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c}.  This combined to put November’s sales volume at its lowest point since February 2000.  LTM sales volume ($400 billion) was 37{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} off its May ’06 peak.


Although transaction sides improved again for the fifth straight month, the rate of improvement has slowed.  Average price (both mean and median) continues to fall.  The combined impact of increased sides with decreased price has meant that LTM sales volume ($331 billion) has held fairly steady for the last five months.  This, however, is still 44{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} off the peak reached in November 2005.


Fannie Mae: Economics & Mortgage Market Analysis

Relatively little has changed since FNMA’s November release.  Depending on your outlook, that’s either no news or good news .  They are still calling for 2008’s  median average price to come in a hair under $200,000 (that projection has moved very little over the last six months) with total EHS of 4,949,000 (slightly higher than last month’s projection; this figure has been slowly revised upwards nearly every month of this year).  The combined impact is of a slightly more positive outlook (in terms of total sales volume) for year-end 2008.

Their 2009 outlook is not as positive as it was last month though, again, this change in outlook is minor.  It is due mostly to a downward revision of price (now projected at $184,800, from a projection of $187,000 last month).  Roughly speaking, they are effectively calling for 2009 sales volume to be 7.6{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than 2008 (keep in mind that 2009’s sales volume figures have been brought down every month for the last six months; it seems hard to believe now but up until June they were even projecting that 2009’s sales volume would be higher than 2008).

Finally, their 2010 projections continue to indicate that although it will be an improvement over 2009, total sales volume is not expected to reach 2008 levels.  In other words, for most brokers: plan as if the total market opportunities over the next two years will be no better than this year.  Improving your top line, and your bottom line, will have to come from initiatives that will capture a greater share of what’s out there.



There is no hiding that today’s release was less than hoped for and the headlines will understandably be negative.  It’s important to keep in mind as you look at this data what impact the mix of business is having, however.  A twelve or thirteen percent drop in median (or mean) sales price does not mean that all homes’ values dropped 12{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} or 13{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c}.  If, in a certain market at a certain time, a higher number of lower-priced homes is selling than usual, the market’s average will decrease even if the value of the higher-priced homes is unchanged.  Although we shouldn’t kid ourselves into thinking all is well, sometimes we need to remind ourselves (and others) of this simple fact as we look at the numbers.

For those who like a really deep dive into the statistical waters, check out this Zillow post on how the mix of business impacts median sales price.


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