existing-home sales remain stable

existing-home sales were stronger than expected in 1/08, running at a pace of very nearly 5 million units, 90,000 more than "expected." the sales pace for 12/07 was revised up to a 4.91 million pace from the previously reported level of 4.89 million.

despite these figures, the inventory situation worsened. the total amount of unsold homes increased to 4.191 million from 3.974 million in december, and the inventory-to-sales ratio increased to 10.3 months from 9.7 months in december and 10.1 months in november. prices fell again, with the median price falling 2.9% during the month to $201,100, a 4.6% drop compared to a year earlier.

the bottom line is that inventory levels remain about 1.5 million units above normal and there is no discernible evidence indicating that the trend has improved materially. there are some hints at stabilization, which likely relate to the fact that very little new supply is being added to the market because homebuilders have curtailed the production of homes - finally!!

increases in household formation and increases in housing affordability (rising faster now and to levels that would normally stimulate demand) will eventually solve the problem, but it will most likely be a long process, as these data indicate. the big question is, what's the definition here of "long process"? i'm betting that by this time next year, the trends will have improved materially.