If I were ever stuck somewhere like a prisoner of war camp, I think I would want to be stuck there with Lawrence Yun, chief economist of the National Association of Realtors.  He seems to be able to find the bright side of anything.  Look at the difference in these two approaches to July’s Existing Home Sales Report.  From CNBC:

 

Sales of existing homes dropped for a fifth straight month in July, falling to the slowest pace in nearly five years, while home prices fell for a record 12th consecutive month.

The National Association of Realtors reported that sales of existing homes dipped by 0.2 percent last month to a seasonally adjusted annual rate of 5.75 million units.

 

Here’s Yun’s take on this:

Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months," he said.  "Some buyers with contracts have been scrambling when loan commitments did not materialize at the last moment, while other potential buyers are simply waiting for the mortgage market to stabilize.

His take is surprising, given that most analysts this morning have been pointing out that July’s numbers were in fact "pre-credit seizure," and that it was their belief that sales would continue to deteriorate. 

 

While the month-to-month decline was modest, the year-over-year decline was 9.2%- in keeping with the declines of recent months:

 

 

Median home prices fell 0.6% from last year’s $230,200  to $228,900.  This is not adjusted for inflation, and seller incentives tend to inflate prices somewhat. 

The most concerning piece of news from this month’s reported is the rise in the inventory:

Inventories of single-family unsold homes represented a 9.2-month supply at the July sales pace, the highest since October 1991.

For all homes – condos and single-family homes – the inventory rose 5.1% to a record 4.59 million, representing a 9.6-month supply. Condo inventories surged 20% to 742,000, an 11.9-month supply at the July sales pace.

Inventories typically fall in July, said Lawrence Yun, senior economist for the real estate trade group. The inventory figures are not seasonally adjusted.

"The inventory is very high," Yun said, adding that rising foreclosures might be increasing levels of inventories by 5% to 7%.

Ordinarily it would be expected that inventory would peak in August-September.  It is likely, then, that next month’s inventory number could be higher. Inventory does tend to drop off in the fall however, as  does sales.  Inventories typically fall because homeowners take their homes off the market.  If foreclosures are swelling inventories however, I think it unlikely that banks and speculators will be delisting properties. This may cause inventory to be higher than generally expected during the winter months.

Last month Yun blamed buyer reluctance not only on fears of  mortgage market issues,  but on concerns  about issues in the broader housing market as well:

Although general buying conditions remain favorable for long-term home buyers, it appears some buyers are looking for more signs of stability before they have enough confidence to make an offer.

Buyer confidence is shot , the credit crunch continues, and the 2007 selling "season" is basically at an end.  There is really no reason to expect any sort of increase in sales until spring, and there’s not a lot of optimism that 2008 is going to look much better than 2007. [Thank you L for your help with the links!]