Written by Steven Hansen
The headline existing home sales improved relative to last month with the NAR stating “Sales easily could have been even 20% higher if there had been more inventory and more choices”.
Analyst Opinion of Existing Home Sales
We are now in the “pandemic normal” – and it seems home sales are on a solid growth footing but note that inventory levels are extremely low limiting how many properties can be sold.
We consider this report a little better than last month, but the rate of growth is decelerating.
Econintersect Analysis
- The unadjusted sales rate of growth decelerated 8.2 % month-over-month, up 15.8 % year-over-year – sales growth rate trend slowed using the 3-month moving average.
- The unadjusted price rate of growth accelerated by 1.5 % month-over-month, up 11.5 % year-over-year
- The homes for sale unadjusted inventory decelerated 2.0 % this month compared to last month and is down 25.7 % year-over-year
- Sales up 0.6 % month-over-month, up 23.7 % year-over-year (reported last month +25.8 % year-over-year)
- Prices up 12.9 % year-over-year
- The market (from Econoday) expected an existing home sales level of 6.500 M to 6.800 M (consensus 6.600 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 continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market. Sales easily could have been even 20% higher if there had been more inventory and more choices.
Home sales are continuing to play a part in propping up the economy. With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year.
I expect more jobs to return, which will spur homebuying in the coming months. He predicts existing-home sales will reach at least 6.5 million in 2021, even as he says mortgage rates are likely to inch higher due to the rising budget deficit and higher inflation.
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 January was $303,900, up 14.1% from January 2020 ($266,300), as prices increased in every region. January’s national price jump marks 107 straight months of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 33% of sales in January, up from 31% in December 2020 and from 32% in January 2020. NAR’s 2020 Profile of Home Buyers and Sellers – released in late 2020 – revealed that the annual share of first-time buyers was 31%.
Individual investors or second-home buyers, who account for many cash sales, purchased 15% of homes in January, up modestly from 14% in December 2020, but down from 17% in January 2020. All-cash sales accounted for 19% of transactions in January, unchanged from December but down from 21% in January 2020.
Distressed sales – foreclosures and short sales – represented less than 1% of sales in January, equal to December’s percentage but down from 2% in January 2020.
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory at the end of January amounted to 1.04 million units, down 1.9% from December and down 25.7% from one year ago (1.40 million). Unsold inventory sits at a 1.9-month supply at the current sales pace, equal to December’s supply and down from the 3.1-month amount recorded in January 2020. NAR first began tracking the single-family home supply in 1982.
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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