Written by Steven Hansen
The headline existing home sales improved relative to last month with the authors saying “Falling mortgage rates are improving housing affordability and nudging buyers into the market”.
Analyst Opinion of Existing Home Sales
The rolling averages for existing home sales have been improving for the last 6 months. This month the rolling averages remained in contraction.
Median home prices declined this month which may have more to do with increased sales than mortgage rates.
Although this was a much better month than June, keep in mind that the rolling averages are improving but are in contraction.
Econintersect Analysis
- The unadjusted sales rate of growth accelerated 10.6 % month-over-month, up 3.3 % year-over-year – sales growth rate trend improved using the 3-month moving average.
- The unadjusted price rate of growth was unchanged month-over-month, up 3.1 % year-over-year
- The homes for sale unadjusted inventory declined this month compared to last month but remains historically low for Julys.
- Sales up 2.5 % month-over-month, up 0.6 % year-over-year
- Prices up 4.3 % year-over-year – the rate of growth is unchanged this month.
- The market (from Econoday) expected annualized sales volumes of 5.250 M to 5.500 M (consensus 5.385 million) vs the 5.42 million reported.
The graph below the presents unadjusted home sales volumes.
Here are the headline words from the NAR analysts:
“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” said Lawrence Yun, NAR’s chief economist. However, he added that the supply of affordable housing is severely low. “The shortage of lower-priced homes have markedly pushed up home prices.”
“Clearly, the inventory of moderately-priced homes is inadequate and more home building is needed,” said Yun. “Some new apartments could be converted into condominiums thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration (FHA) mortgages to buy condo properties.”
“Mortgage rates are important to consumers, but so is confidence about the nation’s overall economic outlook,” Yun continued. “Home buying is a serious long term decision and current low or even lower future mortgage rates may not in themselves meaningfully boost sales unless accompanied by improved consumer confidence.”
“Present rates have opened the market for a number of potential buyers who couldn’t afford a home just a year ago,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota, and broker at Edina Realty. “Additionally, NAR has been working with the FHA for years to establish new condominium loan policies. Our hard work has paid off, and this change will begin benefiting buyers, sellers and our members as soon as this fall.”
To remove the seasonality of home prices, here is a year-over-year graph which demonstrates a general improving home price rate of growth in 2019.
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 July was $280,800, up 4.3% from July 2018 ($269,300). July’s price increase marks the 89th straight month of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 32% of sales in July, down from 35% the month prior and about equal to the 32% recorded in July 2018. NAR’s 2018 Profile of Home Buyers and Sellers – released in late 20184 – revealed that the annual share of first-time buyers was 33%.
As the share of first-time buyers rose, individual investors or second-home buyers, who account for many cash sales purchased 11% of homes in July, up from 10% recorded in June 2019 and down from 12% recorded in July a year ago. All-cash sales accounted for 19% of transactions in July, up from June and down from July of 2018 (16% and 20%, respectively).
Unadjusted Inventories are above the levels of one year ago.
Total housing inventory3 at the end of July decreased to 1.89 million, down from 1.92 million existing-homes available for sale in June, and a 1.6% decrease from 1.92 million one year ago. Unsold inventory is at a 4.2-month supply at the current sales pace, down from the 4.4 month-supply recorded in June and down from the 4.3-month supply recorded in July of 2018.
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 completely unbiased analysis. Econintersect analyzes using the raw data. Also, note the National Association of Realtors (NAR) new methodology has a 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).
include(“/home/aleta/public_html/files/ad_openx.htm”); ?>
