May 2019 Headline Existing Home Sales Improved

Written by Steven Hansen

The headline existing home sales improved relative to last month with the authors saying “Sales are strengthening in all regions while we see price appreciation for recent buyers.”

Econintersect Analysis

• The unadjusted sales rate of growth accelerated 1.8 % month-over-month, up 0.1 % year-over-year – sales growth rate trend improved using the 3-month moving average.
• The unadjusted price rate of growth up 0.9 % month-over-month, up 3.4 % year-over-year
• The homes for sale unadjusted inventory grew this month compared to last month, but remains historically low for Mays, but is up 1.7 % from inventory levels one year ago).

NAR reported:

• Sales up 2.5 % month-over-month, down 1.1 % year-over-year
• Prices up 4.8 % year-over-year – the rate of growth is decelerating this month.
• The market (from Econoday) expected annualized sales volumes of 5.200 M to 5.470 M (consensus 5.290 million) vs the 5.34 million reported.

The graph below the presents unadjusted home sales volumes.

Here are the headline words from the NAR analysts:

Lawrence Yun, NAR’s chief economist, said the 2.5% jump shows that consumers are eager to take advantage of the favorable conditions. “The purchasing power to buy a home has been bolstered by falling mortgage rates, and buyers are responding.”

“The month of May ushered in the home sales upswing that we had been expecting,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Sales are strengthening in all regions while we see price appreciation for recent buyers.”

To remove the seasonality of 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 May was $277,700, up 4.8% from May 2018 ($265,100). May’s price increase marks the 87th straight month of year-over-year gains.

According to the NAR;

First-time buyers were responsible for 32% of sales in May, unchanged from the 32% the month prior and up from the 31% recorded in May 2018. NAR’s 2018 Profile of Home Buyers and Sellers — released in late 2018 — revealed that the annual share of first-time buyers was 33%.

All-cash sales accounted for 19% of transactions in May, down from April and a year ago (20% and 21%, respectively). Individual investors, who account for many cash sales, purchased 13% of homes in May, down from 16% in April and from 14% a year ago.

Unadjusted Inventories are above the levels of one year ago.

Total housing inventory at the end of May increased to 1.92 million, up from 1.83 million existing homes available for sale in April and a 2.7% increase from 1.87 million a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, up from both the 4.2 month supply in April and from 4.2 months in May 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 completely unbiased analysis. Econintersect analyzes using the raw data. Also, note the National Association of Realtors (NAR) new methodology has a 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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