Written by Steven Hansen
The headline existing home sales declined with the authors saying “Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation”. Our analysis shows home sales three month rolling average is in contraction year-over-year and worsening.
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 Decembers. Despite the NAR’s assertion that “After two consecutive months of increases, existing-home sales declined in the month of December” – even using their wackiy methodology to determine rate of growth – the rate of growth year-over-year has been in contraction and declining for the last 4 months.
Econintersect Analysis
- Unadjusted sales rate of growth decelerated 7.2 % month-over-month, down 11.7 % year-over-year – sales growth rate trend declined using the 3 month moving average.
- Unadjusted price rate of growth down 0.6 % month-over-month, up 1.6 % 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 down 6.4 % month-over-month, down 10.3 % year-over-year
- Prices up 2.9 % year-over-year – rate of growth is slowing.
- The market (from Econoday) expected annualized sales volumes of 5.200 M to 5.400 M (consensus 5.240 million) vs the 4.99 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 current housing numbers are partly a result of higher interest rates during much of 2018. “The housing market is obviously very sensitive to mortgage rates. Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring.”
“Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation,” says Yun. “But there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.”
“The partial shutdown of the federal government has not had a significant effect on December closings, but the uncertainty of a shutdown has the potential to harm the market,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Once the government is fully reopened, I am hopeful that housing transactions will increase.”
To remove the seasonality in home prices, here is a year-over-year graph which demonstrates a general slowing in home price rate of growth since2018.
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 December was $253,600, up 2.9 percent from December 2017 ($246,500). December’s price increase marks the 82nd straight month of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 32 percent of sales in December, down from last month (33 percent), but the same as a year ago. NAR’s 2018 Profile of Home Buyers and Sellers – released in late 20184 – revealed that the annual share of first-time buyers was 33 percent.
All-cash sales accounted for 22 percent of transactions in December, up from November and a year ago (21 and 20 percent, respectively). Individual investors, who account for many cash sales, purchased 13 percent of homes in December, the same as November but down from a year ago (16 percent).
Unadjusted Inventories are above the levels of one year ago.
Total housing inventory at the end of December decreased to 1.55 million, down from 1.74 million existing homes available for sale in November, but represents an increase from 1.46 million a year ago. Unsold inventory is at a 3.7-month supply at the current sales pace, down from 3.9 last month and up from 3.2 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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