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posted on 21 April 2017

March 2017 Headline Existing Home Growth Pace Quickens

Written by Steven Hansen

The headlines for existing home sales growth pace declined improved saying "finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain". Our analysis of the unadjusted data agrees.

Analyst Opinion of Existing Home Sales

This was a good month for home sales which makes up for the poor month last month. Note that the sales rate of homes over the last year is averaging about 5% growth year over year.

Econintersect Analysis

  • Unadjusted sales rate of growth accelerated 8.0 % month-over-month, up 8.3 % year-over-year - sales growth rate trend accelerated using the 3 month moving average.
  • Unadjusted price rate of growth decelerated 0.3 % month-over-month, up 5.3 % year-over-year - price growth rate trend accelerated using the 3 month moving average.
  • The homes for sale inventory marginally grew this month, remains historically low for Marchs, and is down 6.6 % from inventory levels one year ago).

NAR reported:

  • Sales up 4.4 % month-over-month, up 5.9 % year-over-year.
  • Prices up 6.8 % year-over-year
  • The market expected annualized sales volumes of 5.485 M to 5.800 M (consensus 5.605 million) vs the 5.71 million reported.

The graph below presents unadjusted home sales volumes.

Here are the headline words from the NAR analysts:Added Yun, "Bolstered by"Last month's swift price gains and the remarkably short time a home was on the market are directly the result of the homebuilding industry's struggle to meet the dire need for more new homes," said Yun. "A growing pool of all types of buyers is competing for the lackluster amount of existing homes on the market. Until we see significant and sustained multi-month increases in housing starts, prices will continue to far outpace incomes and put pressure on those trying to buy." strong consumer confidence and underlying demand, home sales are up convincingly from a year ago nationally and in all four major regions despite the fact that buying a home has gotten more expensive over the past year."

Lawrence Yun, NAR chief economist, says existing sales roared back in March and were led by hefty gains in the Northeast and Midwest. "The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month," he said. "Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does."

Added Yun, "Bolstered by strong consumer confidence and underlying demand, home sales are up convincingly from a year ago nationally and in all four major regions despite the fact that buying a home has gotten more expensive over the past year."

"Last month's swift price gains and the remarkably short time a home was on the market are directly the result of the homebuilding industry's struggle to meet the dire need for more new homes," said Yun. "A growing pool of all types of buyers is competing for the lackluster amount of existing homes on the market. Until we see significant and sustained multi-month increases in housing starts, prices will continue to far outpace incomes and put pressure on those trying to buy."

NAR President William E. Brown, says patience is virtue for prospective first-time buyers this spring. "Realtors® in most markets are saying interest from first-timers is up this year, but competition is stiff for listings in their price range," he said. "The best advice is to lean on the guidance of a Realtor® throughout the home search and be careful about stretching the budget too far. Don't get frustrated by losing out on a home and know the right one will eventually come along in due time."

To remove the seasonality in home prices, here is a year-over-year graph which demonstrates a general improvement in home price rate of growth since mid-2012.

Econintersect does a more complete analysis of home prices with the Case-Shiller analysis. The graphs above on prices use a three month rolling average of the NAR data, and show a 3.6 % year-over-year gain.

The home price situation according to the NAR:

The median existing-home price 2 for all housing types in March was $236,400, up 6.8 percent from March 2016 ($221,400). March's price increase marks the 61st consecutive month of year-over-year gains.

According to the NAR;

First-time buyers were 32 percent of sales in March, which is unchanged from February and up from 30 percent a year ago.

All-cash sales were 23 percent of transactions in March, down from 27 percent in February and 25 percent a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in March, down from 17 percent in February but up from 14 percent a year ago. Sixty-three percent of investors paid in cash in March.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory 3 at the end of March increased 5.8 percent to 1.83 million existing homes available for sale, but is still 6.6 percent lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (unchanged from February).

Caveats on Use of NAR Existing Home Sales Data

The National Association of Realtors (NAR) is a trade organization. Their analysis tends to understate the bad, and overstate the good. However, the raw (and unadjusted) data is released which allows a complete unbiased analysis. Econintersect analyzes using the raw data. Also note the National Association of Realtors (NAR) new methodology now has moderate back revision to the data - so it is best to look at trends, and not get too excited about each month's release.

Econintersect determines the month-over-month change by subtracting the current month's year-over-year change from the previous month's year-over-year change. This is the best of the bad options available to determine month-over-month trends - as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).



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