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posted on 21 June 2017

May 2017 Headline Existing Home Growth Rebounds

Written by Steven Hansen

The headlines for existing home sales growth rebounded saying "Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher". Our analysis of the unadjusted data agrees.

Analyst Opinion of Existing Home Sales

This was a relatively good month for home sales which offsets last month's poor showing. The rolling averages improved. It is true that low priced inventory is almost non-existent.

Econintersect Analysis

  • Unadjusted sales rate of growth accelerated 10.6 % month-over-month, up 5.7 % 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 4.8 % year-over-year - price growth rate trend decelerated using the 3 month moving average.
  • The homes for sale inventory grew this month, remains historically low for Mays, and is down 8.4 % from inventory levels one year ago).

NAR reported:

  • Sales up 1.1 % month-over-month, up 2.7 % year-over-year.
  • Prices up 5.8 % year-over-year
  • The market expected annualized sales volumes of 5.450 M to 5.650 M (consensus 5.550 million) vs the 5.62 million reported.

The graph below presents unadjusted home sales volumes.

Here are the headline words from the NAR analysts:

Lawrence Yun, NAR chief economist, says sales activity expanded in May as more buyers overcame the increasingly challenging market conditions prevalent in many areas. "The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level," he said. "Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher."

"Home prices keep chugging along at a pace that is not sustainable in the long run," added Yun. "Current demand levels indicate sales should be stronger, but it's clear some would-be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions."

Properties typically stayed on the market for 27 days in May, which is down from 29 days in April and 32 days a year ago; this is the shortest timeframe since NAR began tracking in May 2011. Short sales were on the market the longest at a median of 94 days in May, while foreclosures sold in 48 days and non-distressed homes took 27 days. Fifty-five percent of homes sold in May were on the market for less than a month (a new high).

"With new and existing supply failing to catch up with demand, several markets this summer will continue to see homes going under contract at this remarkably fast pace of under a month," said Yun.

"Of the barriers analyzed in the white paper, single-family housing shortages will be the biggest challenge for prospective first-time buyers this year," said President William E. Brown. "Those hoping to buy an entry-level, single-family home continue to see minimal choices. The best advice for these home shoppers is to know what you can afford, lean on the guidance of a Realtor® and act fast once an ideal property within the budget is listed."

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 home price situation according to the NAR:

The median existing-home price2 for all housing types in May was $252,800. This surpasses last June ($247,600) as the new peak median sales price, is up 5.8 percent from May 2016 ($238,900) and marks the 63rd straight month of year-over-year gains.

According to the NAR;

First-time buyers were 33 percent of sales in May, which is down from 34 percent in April but up from 30 percent a year ago. NAR's 2016 Profile of Home Buyers and Sellersreleased in late 2016 — revealed that the annual share of first-time buyers was 35 percent.

All-cash sales were 22 percent of transactions in May, up from 21 percent in April and unchanged from a year ago. Individual investors, who account for many cash sales, purchased 16 percent of homes in May, up from 15 percent in April and 13 percent a year ago. Sixty-four percent of investors paid in cash in May.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory at the end of May rose 2.1 percent to 1.96 million existing homes available for sale, but is still 8.4 percent lower than a year ago (2.14 million) and has fallen year-over-year for 24 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.7 months a year ago.

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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