Over from Calculated Risk, we have a preview of existing home sales: http://www.calculatedriskblog.com/2010/09/existing-home-sales-preview.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+CalculatedRisk+(Calculated+Risk)
Given that the weekly MBA purchase index has basically not moved in a while and the current levels of pending home sales, the 4.1 million SAAR makes sense.
In terms of what this means for prices, generally inventories over an eight months supply imply moderately to steeply falling prices though the relationship is not ironclad. We did see out of the FHFA today that home prices in July fell 0.5% from June. Given that there is a bit of a lag between when inventory to sales ratios surge and prices drop, we should expect fairly steady small to moderate price declines for many months to come. Currently, a number of forecasts are calling for about a 5-7% decline. Based on some regression work I've done, that seems reasonable.
An interesting consequence of that is that it makes the home-buying decision a little more complicated. The old argument that you want to own instead of rent so that you can build equity doesn't exactly work when your monthly principal payments are going to offset a decline in prices. Just some food for thought.