July 2020 Headline Existing Home Sales Second Month Of Significant Sales Gain

Written by Steven Hansen

The headline existing home sales improved relative to last month with the NAR stating “current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”.

Econintersect Analysis

• The unadjusted sales rate of growth accelerated 14.5 % month-over-month, up 10.6 % year-over-year – sales growth rate trend accelerated using the 3-month moving average.
• The unadjusted price rate of growth accelerated by 4.2 % month-over-month, up 6.5 % year-over-year
• The homes for sale unadjusted inventory marginally grew this month compared to last month and is down 21.1 % year-over-year

NAR reported:

• Sales up 24.7 % month-over-month, up 6.7 % year-over-year (reported last month -11.3 % year-over-year)
• Prices up 8.5 % year-over-year
• The market (from Econoday) expected existing home sales level of 4.600 M to 5.750 M (consensus 5.400 M) with a reported value of 5.86 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 housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days. With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.

The number of new listings is increasing, but they are quickly taken out of the market from heavy buyer competition. More homes need to be built.

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 price2 for all housing types in July was $304,100, up 8.5% from July 2019 ($280,400), as prices rose in every region. July’s national price increase marks 101 straight months of year-over-year gains. For the first time ever, national median home prices breached the $300,000 level.

According to the NAR;

First-time buyers were responsible for 34% of sales in July, down from 35% in June 2020 and up from 32% in July 2019. NAR’s 2019 Profile of Home Buyers and Sellers – released in late 2019 – revealed that the annual share of first-time buyers was 33%.

Individual investors or second-home buyers, who account for many cash sales, purchased 15% of homes in July, up from both 9% in June 2020 and from 11% in July 2019. All-cash sales accounted for 16% of transactions in July, equal to the percentage in June 2020 and down from 19% in July 2019.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory at the end of July totaled 1.50 million units, down from both 2.6% in June and 21.1% from one year ago (1.90 million). Unsold inventory sits at a 3.1-month supply at the current sales pace, down from 3.9 months in June and down from the 4.2-month figure recorded in July 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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