Written by Steven Hansen
The headline existing home sales declined relative to last month with the NAR stating “Home sales in November took a marginal step back, but sales for all of 2020 are already on pace to surpass last year’s levels”. This was a record month for November home sales.
Analyst Opinion of Existing Home Sales
We are now in the “pandemic normal” – and it seems home sales (even with the reported decline) are on a solid growth footing but note that inventory levels are extremely low limiting how many properties can be sold.
In perspective, sales in 2020 are better than 2019.
We consider this report about the same as last month.
Econintersect Analysis
- The unadjusted sales rate of growth decelerated 1.1 % month-over-month, up 24.0 % year-over-year – sales growth rate trend significantly accelerated using the 3-month moving average.
- The unadjusted price rate of growth decelerated by 0.9 % month-over-month, up 11.3 % year-over-year
- The homes for sale unadjusted inventory decelerated 2.2 % this month compared to last month and is down 21.8 % year-over-year
- Sales down 2.5 % month-over-month, up 25.8 % year-over-year (reported last month +26.6 % year-over-year)
- Prices up 14.6 % year-over-year
- The market (from Econoday) expected an existing home sales level of 6.600 M to 6.900 M (consensus 6.715 M) with a reported value of 6.69 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 in November took a marginal step back, but sales for all of 2020 are already on pace to surpass last year’s levels. Given the COVID-19 pandemic, it’s amazing that the housing sector is outperforming expectations.
Job recoveries have stalled in the past few months, and fast-rising coronavirus cases along with stricter lockdowns have weakened consumer confidence.
Circumstances are far from being back to the pre-pandemic normal. However, the latest stimulus package and with the vaccine distribution underway, and a very strong demand for homeownership still prevalent, robust growth is forthcoming for 2021.
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 November was $310,800, up 14.6% from November 2019 ($271,300), as prices increased in every region. November’s national price increase marks 105 straight months of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 32% of sales in November, equal to the percentage seen in both October 2020 and November 2019. NAR’s 2020 Profile of Home Buyers and Sellers – released last month4 – revealed that the annual share of first-time buyers was 31%.
Individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in November, identical to the share recorded in October 2020 and a small decline from 16% in October 2019. All-cash sales accounted for 20% of transactions in November, up from 19% in October but unchanged from November 2019.
Distressed sales – foreclosures and short sales – represented less than 1% of sales in November, equal to October’s percentage but down from 2% in November 2019.
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory at the end of November totaled 1.28 million units, down 9.9% from October and down 22% from one year ago (1.64 million). Unsold inventory sits at an all-time low 2.3-month supply at the current sales pace, down from 2.5 months in October and down from the 3.7-month figure recorded in November 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”); ?>
