Written by Steven Hansen
The headline existing home sales improved with the authors saying “The market conditions in November were mixed, with good signs of stabilizing home sales compared to recent months, though down significantly from one year ago”. 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. This month the rolling averages remained in contraction – and worsened. Housing inventory is historically low for Novembers
Econintersect Analysis
- Unadjusted sales rate of growth decelerated 1.9 % month-over-month, down 4.5 % year-over-year – sales growth rate trend declined using the 3 month moving average.
- Unadjusted price rate of growth up 0.1 % month-over-month, up 2.3 % year-over-year – price growth rate trend again marginally slowed using the 3 month moving average.
- The homes for sale unadjusted inventory declined this month compared to last month, and remains historically low for Novembers,but is up 4.2 % from inventory levels one year ago).
- Sales up 1.9 % month-over-month, down 7.0 % year-over-year (published down 5.1 % YoY last month – note that the NAR says sales were up MoM but the YoY rate of growth worsened).
- Prices up 4.2 % year-over-year – rate of growth is slowing.
- The market (from Econoday) expected annualized sales volumes of 5.110 M to 5.300 M (consensus 5.190 million) vs the 5.32 million reported.
The graph below presents unadjusted home sales volumes.
Here are the headline words from the NAR analysts:
Lawrence Yun, NAR’s chief economist, says two consecutive months of increases is a welcomed sign for the market. “The market conditions in November were mixed, with good signs of stabilizing home sales compared to recent months, though down significantly from one year ago. Rising inventory is clearly taming home price appreciation.”
“A marked shift is occurring in the West region, with much lower sales and very soft price growth,” says Yun. “It is also the West region where consumers have expressed the weakest sentiment about home buying, largely due to lack of affordable housing inventory.”
“Inventory is plentiful on the upper-end, but a mismatch between supply and demand exists at affordable price points,” Yun added. “Therefore, facilitating real estate development of affordable housing units in designated Opportunity Zones can provide better housing access in addition to boosting the local economy.”
“It is not surprising to see homes remain on the market a little longer,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Buyers can often negotiate a more favorable price in those circumstances, especially when paired with a motivated seller and the aid of a Realtor® familiar with their local market.”
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 November was $257,700, up 4.2 percent from November 2017 ($247,200). November’s price increase marks the 81st straight month of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 33 percent of sales in November, up from last month and a year ago (31 percent and 29 percent, respectively). NAR’s 2018 Profile of Home Buyers and Sellers – released in late 2018 – revealed that the annual share of first-time buyers was 33 percent.
All-cash sales accounted for 21 percent of transactions in November, down from October and a year ago (23 and 22 percent, respectively). Individual investors, who account for many cash sales, purchased 13 percent of homes in November, down from October and a year ago (15 percent and 14 percent, respectively).
Unadjusted Inventories are above the levels of one year ago.
Total housing inventory3 at the end of November decreased to 1.74 million, down from 1.85 million existing homes available for sale in October. This represents an increase from 1.67 million a year ago, however. Unsold inventory is at a 3.9-month supply at the current sales pace, down from 4.3 last month and up from 3.5 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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