Written by Steven Hansen
The headline existing home sales improved relative to last month with the authors saying “Homebuilders need to ramp up new housing, as the failure to increase construction will put home prices in danger of increasing at a faster pace than income”. The rolling averages slowed this month.
Analyst Opinion of Existing Home Sales
The rolling averages for existing home sales had been improving for the previous 6 months – however this month they declined. The rolling averages remained in contraction.
This was a worse report than July.
Econintersect Analysis
- The unadjusted sales rate of growth decelerated 4.2 % month-over-month, down 0.9 % year-over-year – sales growth rate trend slowed using the 3-month moving average.
- The unadjusted price rate of growth accelerated 0.5 % month-over-month, up 3.5 % year-over-year
- The homes for sale unadjusted inventory declined this month compared to last month but remains historically low for Julys.
- Sales up 1.3 % month-over-month, up 2.6 % year-over-year
- Prices up 4.7 % year-over-year – the rate of growth improved this month.
- The market (from Econoday) expected annualized sales volumes of 5.350 M to 5.440 M (consensus 5.375 million) vs the 5.49 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, attributed the increase in sales to falling mortgage rates. “As expected, buyers are finding it hard to resist the current rates,” he said. “The desire to take advantage of these promising conditions is leading more buyers to the market.”
“Sales are up, but inventory numbers remain low and are thereby pushing up home prices,” said Yun. “Homebuilders need to ramp up new housing, as the failure to increase construction will put home prices in danger of increasing at a faster pace than income.”
“Rates continue to be historically low, which is extremely beneficial for everyone buying or selling a home,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota, and broker at Edina Realty. “The new condominium loan policies, as well as other reforms NAR is pursuing within our housing finance system, will allow even more families and individuals in this country to reach the American Dream of homeownership.”
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 August was $278,200, up 4.7% from August 2018 ($265,600). August’s price increase marks the 90th straight month of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 31% of sales in August, down from 32% in July and equal to the 31% recorded in August 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%.
As the share of first-time buyers rose, individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in August 2019, up from 11% recorded in July and from 13% recorded in August a year ago. All-cash sales accounted for 19% of transactions in August, about equal to July’s percentage and moderately down from August 2018 (19% and 20%, respectively).
Unadjusted Inventories are above the levels of one year ago.
Total housing inventory at the end of August decreased to 1.86 million, down from 1.90 million existing-homes available for sale in July, and marking a 2.6% decrease from 1.91 million one year ago. Unsold inventory is at a 4.1-month supply at the current sales pace, down from 4.2 months in July and from the 4.3-month figure recorded in August 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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