Written by Steven Hansen
The headline existing home sales declined relative to last month with the NAR stating “April’s existing-home sales are the lowest level of sales since July 2010 (3.45 million) and the largest month-over-month drop since July 2010 (-22.5%)”.
Analyst Opinion of Existing Home Sales
The NAR believes the drop in home sales is a temporary condition because of the coronavirus. Although it is possible the economy could spring back quickly – the depth of the economic contraction will have significant impacts down the line. We are now in the “pandemic normal”.
Home prices declined but maybe next month we will see a fuller effect from the coronavirus.
We consider this report weaker than last month.
Please be reminded that all homes SOLD in April likely were under contract in January, February, and March. So the beginning of the contraction of home sales should significantly be impacted beginning with this month’s data – and worsen significantly with the May and June data.
Econintersect Analysis
- The unadjusted sales rate of growth decelerated 22.2 % month-over-month, down 18.2 % year-over-year – sales growth rate trend decelerated using the 3-month moving average.
- The unadjusted price rate of growth decelerated by 0.8 % month-over-month, up 5.4 % year-over-year
- The homes for sale unadjusted inventory significantly declined this month compared to last month and is down 19.7 % year-over-year
- Sales down 17.8 % month-over-month, down 17.2 % year-over-year (reported last month +0.8 % year-over-year)
- Prices up 7.4 % year-over-year
- The market (from Econoday) expected existing home sales level of 4.200 M to 4.920 M (consensus 4.325 M) with a reported value of 4.33 million
The graph below presents the unadjusted home sales volumes comparing growth in every month.
Here are the headline words from Lawrence Yun, NAR’s chief economist:
The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales. But the listings that are on the market are still attracting buyers and boosting home prices.
Record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen. Still, more listings and increased home construction will be needed to tame price growth.
To remove the seasonality of home prices, here is a year-over-year graph that demonstrates a general improving home price rate of growth.
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 April was $286,800, up 7.4% from April 2019 ($267,000), as prices increased in every region. April’s national price increase marks 98 straight months of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 36% of sales in April, up from 34% in March 2020 and 32% in April 2019. NAR’s 2019 Profile of Home Buyers and Sellers – released in late 20195 – revealed that the annual share of first-time buyers was 33%.
Individual investors or second-home buyers, who account for many cash sales, purchased 10% of homes in April, down from 13% in March 2020 and from 16% in April 2019. All-cash sales accounted for 15% of transactions in April, down from 19% in March 2020 and 20% in April 2019.
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory at the end of April totaled 1.47 million units, down 1.3% from March, and down 19.7% from one year ago (1.83 million). Unsold inventory sits at a 4.1-month supply at the current sales pace, up from 3.4-months in March and down from the 4.2-month figure recorded in April 2019.
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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