Written by Steven Hansen
The headline existing home sales growth was unchanged with the authors saying “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market”. Our analysis shows home sales three month rolling average is 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 low for Augusts – 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 1.2 % month-over-month, up 0.7 % year-over-year – sales growth rate trend declined using the 3 month moving average.
- Unadjusted price rate of growth unchanged month-over-month, up 3.0 % year-over-year – price growth rate trend again marginally slowed using the 3 month moving average.
- The homes for sale unadjusted inventory insignificantly declined this month compared to last month, but remains historically low for Julys, and is unchanged from inventory levels one year ago).
- Sales unchanged month-over-month, down 1.5 % year-over-year.
- Prices up 3.0 % year-over-year – rate of growth is slowing.
- The market (from Nasdaq / Econoday) expected annualized sales volumes of 5.290 M to 5.460 M (consensus 5.360 million) vs the 5.34 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 the decline in existing home sales appears to have hit a plateau with robust regional sales. “Strong gains in the Northeast and a moderate uptick in the Midwest helped to balance out any losses in the South and West, halting months of downward momentum,” he said. “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market.”
“While inventory continues to show modest year over year gains, it is still far from a healthy level and new home construction is not keeping up to satisfy demand,” said Yun. “Homes continue to fly off the shelves with a majority of properties selling within a month, indicating that more inventory – especially moderately priced, entry-level homes – would propel sales.”
“Rising interests rates along with high home prices and lack of inventory continues to push entry-level and first time home buyers out of the market,” said Yun. “Realtors® continue to report that the demand is there – that current renters want to become homeowners – but there simply are not enough properties available in their price range.”
“Realtors® across the country report that their clients waver about the decision to list their home; they are excited by the prospect of receiving many offers, they are concerned that they will not be able to find a new home to purchase,” said NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty. “Unfortunately this fluctuating view is contributing to the short supply of homes. Buyers hoping to find an entry level home in this market should work with a Realtor® and be prepared to move quickly as listings sell quickly.”
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 August was $264,800, up 4.6 percent from August 2017 ($253,100). August’s price increase marks the 78th straight month of year-over-year gains.
According to the NAR;
First-time buyers were 31 percent of sales in August, down from last month (32 percent) but the same as a 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 20 percent of transactions in August, unchanged from July and a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in August, unchanged from July and down from 15 percent a year ago.
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory at the end of August also remained unchanged from July at 1.92 million existing homes available for sale, and is up from 1.87 million a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, consistent from last month and up from 4.1 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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