Written by Steven Hansen
The headline existing home sales declined relative to last month with the authors saying “Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential”. The rolling averages improved this month.
Analyst Opinion of Existing Home Sales
The rolling averages for existing home sales had been improving for the previous 6 months. The rolling averages are now in expansion. This is a much stronger report than last month.
Econintersect Analysis
- The unadjusted sales rate of growth accelerated 8.7 % month-over-month, up 7.4 % year-over-year – sales growth rate trend slowed using the 3-month moving average.
- The unadjusted price rate of growth accelerated 0.6 % month-over-month, up 4.2 % year-over-year
- The homes for sale unadjusted inventory was unchanged this month compared to last month but remains historically low for Septembers.
- Sales down 2.2 % month-over-month, up 3.9 % year-over-year
- Prices up 5.9 % year-over-year – the rate of growth improved this month.
- The market (from Econoday) expected annualized sales volumes of 5.400 M to 5.550 M (consensus 5.450 million) vs the 5.38 million reported.
The graph below presents the unadjusted home sales volumes.
Here are the headline words from the NAR analysts:
Lawrence Yun, NAR’s chief economist, said that despite historically low mortgage rates, sales have not commensurately increased, in part due to a low level of new housing options. “We must continue to beat the drum for more inventory,” said Yun, who has called for additional home construction for over a year. “Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential.”
“For families on the sidelines thinking about buying a home, current rates are making the climate extremely favorable in markets across the country,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota, and broker at Edina Realty. “These traditionally low rates make it that much easier to qualify for a mortgage, and they also open up various housing selections to buyers everywhere.”
“Mortgage rates under 4% are amazingly attractive for homebuyers,” said Yun. “The rise in foot traffic as evidenced by the open rates of SentriLock key boxes shows growing buyer interest.”
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 price2 for all housing types in September was $272,100, up 5.9% from September 2018 ($256,900), as prices rose in all regions. September’s price increase marks 91 straight months of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 33% of sales in September, up from 31% in August and 32% recorded in September 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 or second-home buyers, who account for many cash sales, purchased 14% of homes in September 2019, unchanged from August but down from 16% recorded last September. All-cash sales accounted for 17% of transactions in September, down from 19% in August and 21% in September 2018.
Unadjusted Inventories are above the levels of one year ago.
Total housing inventory at the end of September sat at 1.83 million, approximately equal to the amount of existing-homes available for sale in August, but a 2.7% decrease from 1.88 million one year ago. Unsold inventory is at a 4.1-month supply at the current sales pace, up from 4.0 months in August and down from the 4.4-month figure recorded in September 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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