Written by Steven Hansen
The headline existing home sales growth “slowed” with the authors saying sales “The root cause of the underperforming sales activity in much of the country so far this year continues to be the utter lack of available listings on the market to meet the strong demand for buying a home“. Our analysis shows improvement.
Analyst Opinion of Existing Home Sales
The rolling averages have been slowing since the beginning of 2017, but they accelerated this month. The rolling averages remain marginally in contraction. Housing inventory is now at historical lows for Aprils – and if you do not have enough houses for sale – then that means home sales cannot improve.
Econintersect Analysis
- Unadjusted sales rate of growth accelerated 7.5 % month-over-month, up 2.9 % year-over-year – sales growth rate trend improved using the 3 month moving average.
- Unadjusted price rate of growth decelerated 0.7 % month-over-month, up 3.3 % year-over-year – price growth rate trend marginally slowed using the 3 month moving average.
- The homes for sale unadjusted inventory improved this month compared to last month, but remains historically low for Aprilss, and is down 6.3 % from inventory levels one year ago).
- Sales down 2.5 % month-over-month, down 1.4 % year-over-year.
- Prices up 5.3 % year-over-year
- The market expected annualized sales volumes of 5.500 M to 5.640 M (consensus 5.600 million) vs the 5.46 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 this spring’s staggeringly low inventory levels caused existing sales to slump in April. “The root cause of the underperforming sales activity in much of the country so far this year continues to be the utter lack of available listings on the market to meet the strong demand for buying a home,” he said. “Realtors® say the healthy economy and job market are keeping buyers in the market for now even as they face rising mortgage rates. However, inventory shortages are even worse than in recent years, and home prices keep climbing above what many home shoppers are able to afford.”
“What is available for sale is going under contract at a rapid pace,” said Yun. “Since NAR began tracking this data in May 2011, the median days a listing was on the market was at an all-time low in April, and the share of homes sold in less than a month was at an all-time high.”
“With mortgage rates and home prices continuing to climb, an increase in housing supply is absolutely crucial to keeping affordability conditions from further deterioration,” said Yun. “The current pace of price appreciation far above incomes is not sustainable in the long run.”
“Especially with mortgage rates going up in recent weeks, prospective buyers should visit with more than one lender to ensure they are getting the lowest rate possible,” NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty. “Receiving a rate quote from multiple lenders could lead to considerable savings over the life of the loan. Ask a Realtor® for a few recommendations of lenders to contact to get a quote.”
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 – however a slowing growth trend is developing.
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 price for all housing types in April was $257,900, up 5.3 percent from April 2017 ($245,000). March’s price increase marks the 74th straight month of year-over-year gains.
According to the NAR;
First-time buyers were 33 percent of sales in April (highest since last July), which is up from 30 percent last month but down from 34 percent a year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released in late 20175 – revealed that the annual share of first-time buyers was 34 percent.
All-cash sales were 21 percent of transactions in April, which is up from 20 percent in March and unchanged from a year ago. Individual investors, who account for many cash sales, purchased 15 percent of homes in April (unchanged from last month and a year ago).
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory at the end of April increased 9.8 percent to 1.80 million existing homes available for sale, but is still 6.3 percent lower than a year ago (1.92 million) and has fallen year-over-year for 35 consecutive months. Unsold inventory is at a 4.0-month supply at the current sales pace (4.2 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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