Written by Steven Hansen
The headline existing home sales improved relative to last month with the authors saying “A powerful combination of lower mortgage rates, more inventory, rising income and higher consumer confidence is driving the sales rebound”.
Analyst Opinion of Existing Home Sales
The rolling averages for existing home sales have been slowing since the beginning of 2017. This month the rolling averages remained in contraction – but improved. Housing inventory is historically low for Februarys and the year-over-year growth slowed. Overall, this was better data than last month – but keep in mind that sales are contracting year-over-year.
Econintersect Analysis
- Unadjusted sales rate of growth accelerated 6.8 % month-over-month, down 2.2 % year-over-year – sales growth rate trend marginally improved using the 3-month moving average.
- Unadjusted price rate of growth up 0.8 % month-over-month, up 2.7 % year-over-year – price growth rate trend again marginally improved using the 3-month moving average.
- The homes for sale unadjusted inventory grew this month compared to last month, but remains historically low for Februarys, but is up 3.1 % from inventory levels one year ago).
- Sales up 11.8 % month-over-month, down 1.8 % year-over-year
- Prices up 3.6 % year-over-year – the rate of growth is accelerating this month.
- The market (from Econoday) expected annualized sales volumes of 4.990 M to 5.300 M (consensus 5.080 million) vs the 5.51 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, credited a number of aspects to the jump in February sales. “A powerful combination of lower mortgage rates, more inventory, rising income and higher consumer confidence is driving the sales rebound.”
“It is very welcoming to see more inventory showing up in the market,” says Yun. “Consumer foot traffic consequently is rising as measured by the opening rate of SentriLockÒ key boxes.”
Yun, who has called for more inventory over the course of 2018, says the market would benefit greatly in 2019 with additional new housing.
“For sustained growth, significant construction of moderately priced-homes is still needed. More construction will help boost local economies and more home sales will help lessen wealth inequality as more households can enjoy in housing wealth gains.” A typical homeowner accumulated an estimated $8,700 in housing equity over the past 12 months and $21,300 over the past 24 months.
“We’re very happy to see homebuyers returning to the market, as the beginning of Spring represents a prime time to purchase a new home,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Potential buyers and sellers should seek out a local RealtorÒ to stay abreast of the market and take advantage of the various housing benefits that are currently being extended during housing transactions.”
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 since 2018.
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 February was $249,500, up 3.6 percent from February 2018 ($240,800). February’s price increase marks the 84thstraight month of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 32 percent of sales in February, up from last month and a year ago (both 29 percent). 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 23 percent of transactions in February, equal to January’s percentage, but marginally down from a year ago (24 percent). Individual investors, who account for many cash sales, purchased 16 percent of homes in February, identical to January’s 16 percent, but a tick up from a year ago (15 percent).
Unadjusted Inventories are above the levels of one year ago.
Total housing inventory at the end of February increased to 1.63 million, up from 1.59 million existing homes available for sale in January, a 3.2 percent increase from 1.58 million a year ago. Unsold inventory is at a 3.5-month supply at the current sales pace, down from 3.9 months in January but up from 3.4 months in February 2018.
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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