Home Sales: A Disturbing Trend

NEW YORK (TheStreet) -- There was a big rebound in existing-home sales in September, according to the National Association of Realtors.

"Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months," the NAR said.

The number of sales of foreclosed properties in September was 29%, near the level around 30% seen for the past several months. The current data is at a rate around 1.5 million foreclosed and distressed-home sales per year.

A series of surveys by the Housing Predictor has found that as many as 25 million foreclosures may occur in this housing crisis. Since this estimate is based on interviews with people living in the current environment, the estimate will be too high if the economy improves and unemployment declines.

Nonetheless, it seems certain that millions of foreclosures are yet to come. According to a Bloomberg report, Amherst Securities projects another 7 million foreclosures will occur. Whatever the exact number, it will provide significant downward pressure on prices and could add at least another one to two years to inventory.

Jim Cramer has projected that increased buying will burn through foreclosure inventory. This can only happen if there is a robust recovery, with increasing employment. In my opinion, a significant increase in home buying seems unlikely in the next twelve months, as lingering unemployment problems are almost certain.

September sales volumes were up from August only after a seasonal adjustment, "correcting" for factors which suppressed home sales in September from the peak summer season. Prices were also down year over year, continuing a three-year pattern.