August 2020 Headline Existing Home Sales Third Month Of Significant Sales Gain

Written by Steven Hansen

The headline existing home sales improved relative to last month with the NAR stating “The need for housing will grow even further, especially in areas that are attractive to those who can work from home”.

Econintersect Analysis

• The unadjusted sales rate of growth decelerated 5.1 % month-over-month, up 5.4 % year-over-year – sales growth rate trend accelerated using the 3-month moving average.
• The unadjusted price rate of growth accelerated by 2.0 % month-over-month, up 8.7 % year-over-year
• The homes for sale unadjusted inventory marginally declined this month compared to last month and is down 18.5 % year-over-year

NAR reported:

• Sales up 2.4 % month-over-month, up 10.5 % year-over-year (reported last month +6.7% year-over-year)
• Prices up 11.4 % year-over-year
• The market (from Econoday) expected existing home sales level of 5.550 M to 6.440 M (consensus 5.965 M) with a reported value of 6.00 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:

Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market. Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.

Over recent months, we have seen lumber prices surge dramatically. This has already led to an increase in the cost of multifamily housing and an even higher increase for single-family homes.

The need for housing will grow even further, especially in areas that are attractive to those who can work from home. As highlighted in NAR’s August study, the 2020 Work From Home Counties report, remote work opportunities are likely to become a growing part of the nation’s workforce culture. Yun believes this reality will endure, even after a coronavirus vaccine is available.

Housing demand is robust but supply is not, and this imbalance will inevitably harm affordability and hinder ownership opportunities. To assure broad gains in homeownership, more new homes need to be constructed.

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 August was $310,600, up 11.4% from August 2019 ($278,800), as prices rose in every region. August’s national price increase marks 102 straight months of year-over-year gains.

According to the NAR;

First-time buyers were responsible for 33% of sales in August, down from 34% in July 2020, but up from 31% in August 2019. NAR’s 2019 Profile of Home Buyers and Sellers – released in late 20194 – revealed that the annual share of first-time buyers was 33%.

Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in August, a small change from July’s figure of 15% and equal to the August 2019 rate of 14%. All-cash sales accounted for 18% of transactions in August, up from 16% in July 2020 and down from 19% in August 2019.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory at the end of August totaled 1.49 million units, down 0.7% from July and down 18.6% from one year ago (1.83 million). Unsold inventory sits at a 3.0-month supply at the current sales pace, down from 3.1 months in July and down from the 4.0-month figure recorded in August 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).

include(“/home/aleta/public_html/files/ad_openx.htm”); ?>

Permanent link to most recent post on this topic