Written by Steven Hansen
The headline existing home sales declined relative to last month with the authors saying “the nation is in the midst of a housing shortage and much more inventory is needed. Imbalance persists for mid-to-lower priced homes with solid demand and insufficient supply, which is consequently pushing up home prices”.
Analyst Opinion of Existing Home Sales
The rolling averages for existing home sales have been improving for the last 5 months. This month the rolling averages remained in contraction. Housing inventory is historically low for Mays.
Econintersect Analysis
- The unadjusted sales rate of growth decelerated 8,8 % month-over-month, down 7.5 % year-over-year – sales growth rate trend improved using the 3-month moving average.
- The unadjusted price rate of growth decelerated 0.5 % month-over-month, up 3.1 % year-over-year
- The homes for sale unadjusted inventory grew this month compared to last month, but remains historically low for Junes, but is unchanged from inventory levels one year ago).
- Sales down 1,7 % month-over-month, down 2.2 % year-over-year
- Prices up 4.3 % year-over-year – the rate of growth is decelerating this month.
- The market (from Econoday) expected annualized sales volumes of 5.150 M to 5.450 M (consensus 5.340 million) vs the 5.27 million reported.
The graph below the presents unadjusted home sales volumes.
Here are the headline words from the NAR analysts:
“Home sales are running at a pace similar to 2015 levels – even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country,” said Lawrence Yun, NAR’s chief economist. Yun says the nation is in the midst of a housing shortage and much more inventory is needed. “Imbalance persists for mid-to-lower priced homes with solid demand and insufficient supply, which is consequently pushing up home prices,” he said.
Yun said other factors could be contributing to the low number of sales. “Either a strong pent-up demand will show in the upcoming months, or there is a lack of confidence that is keeping buyers from this major expenditure. It’s too soon to know how much of a pullback is related to the reduction in the homeowner tax incentive.”
“Historically, these rates are incredibly attractive,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Securing and locking in on a mortgage now – given the current, favorable conditions – is a decision that will pay off for years to come.”
To remove the seasonality of home prices, here is a year-over-year graph which demonstrates a general improving home price rate of growth in 2019.
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 June reached an all-time high of $285,700, up 4.3% from June 2018 ($273,800). June’s price increase marks the 88th straight month of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 35% of sales in June, up from 32% the month prior and up from the 31% recorded in June 2018. NAR’s 2018 Profile of Home Buyers and Sellers – released in late 20184 – revealed that the annual share of first-time buyers was 33%.
As the share of first-time buyers rose, individual investors, who account for many cash sales, purchased 10% of homes in June, down from 13% recorded in both May 2019 and June 2018. All-cash sales accounted for 16% of transactions in June, down from May and a year ago (19% and 22%, respectively).
Unadjusted Inventories are above the levels of one year ago.
Total housing inventory3 at the end of June increased to 1.93 million, up from 1.91 million existing-homes available for sale in May, but unchanged from the level of one year ago. Unsold inventory is at a 4.4-month supply at the current sales pace, up from the 4.3 month supply recorded in both May and in June 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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