Written by Steven Hansen
The headline existing home sales growth “slowed” with the authors saying “There continues to be a mismatch since the spring between the growing level of homebuyer demand in most of the country in relation to the actual pace of home sales, which are declining“. Our analysis shows home sales are in contraction year-over-year.
Analyst Opinion of Existing Home Sales
The rolling averages have been slowing since the beginning of 2017. The rolling averages remain marginally in contraction. Housing inventory is at historical lows for Junes – and if you do not have enough houses for sale – then that means home sales cannot improve.
Econintersect Analysis
- Unadjusted sales rate of growth decelerated 1.4 % month-over-month, down 5.0 % year-over-year – sales growth rate trend declined using the 3 month moving average.
- Unadjusted price rate of growth accelerated 0.6 % month-over-month, up 3.7 % 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 Junes, and is up 0.5 % from inventory levels one year ago).
- Sales down 0.6 % month-over-month, down 2.2 % year-over-year.
- Prices up 5.2 % year-over-year
- The market (from Nasdaq / Econoday) expected annualized sales volumes of 0.10 to 0.40 (consensus 5.450 million) vs the 5.38 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 closings inched backwards in June and fell on an annual basis for the fourth straight month. There continues to be a mismatch since the spring between the growing level of homebuyer demand in most of the country in relation to the actual pace of home sales, which are declining,” he said. “The root cause is without a doubt the severe housing shortage that is not releasing its grip on the nation’s housing market. What is for sale in most areas is going under contract very fast and in many cases, has multiple offers. This dynamic is keeping home price growth elevated, pricing out would-be buyers and ultimately slowing sales.
“It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels,” added Yun. “Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”
“Realtors® throughout the country continue to stress that there’s considerable pent-up demand for buying a home among the millennial households in their market,” said Yun. “Unfortunately, they’re just not making meaningful ground, and continue to be held back by too few choices in their price range, and thereby missing out on homeownership and wealth gains.”
“The modest uptick in new listings last month is perhaps good news for would-be buyers who are still in the market after a highly competitive spring buying season,” said NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty. “As summer winds down, the number of home shoppers begins to decrease. Listings are still scarce – especially for entry-level homes – but patience may yield a positive result for those looking to buy in the months ahead.”
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 price2 for all housing types in June was $276,900, surpassing last month as the new all-time high and up 5.2 percent from June 2017 ($263,300). June’s price increase marks the 76th straight month of year-over-year gains.
According to the NAR;
First-time buyers were 31 percent of sales in June, which is unchanged from last month and down from 32 percent year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released in late 20174 – revealed that the annual share of first-time buyers was 34 percent.
All-cash sales were 22 percent of transactions in June, up from 21 percent in May and 18 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in June, down from 15 percent in May and unchanged from a year ago.
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory at the end of June climbed 4.3 percent to 1.95 million existing homes available for sale, and is 0.5 percent above a year ago (1.94 million) – the first year-over-year increase since June 2015. Unsold inventory is at a 4.3-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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