Written by Steven Hansen
The headline existing home sales declined relative to last month with the NAR stating “Despite the decline, housing demand is still strong compared to one year ago, evidenced by home sales from this January to April, which are up 20% compared to 2020″.
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 about the same as last month, and the rate of growth is decelerating.
Econintersect Analysis
- The unadjusted sales rate of growth accelerated 21.2 % month-over-month, up 37.6 % year-over-year – sales growth rate trend slowed using the 3-month moving average.
- The unadjusted price rate of growth accelerated by 1.9 % month-over-month, up 13.6 % year-over-year
- The homes for sale unadjusted inventory accelerated 9.0 % this month compared to last month and is down 20.5 % year-over-year
- Sales down 2.7 % month-over-month, up 12.3 % year-over-year (reported last month +33.9 % year-over-year – all do to comparisons to the lockdown period one year ago)
- Median prices up 19.1 % year-over-year
- The market (from Econoday) expected an existing home sales level of 5.900 M to 6.300 M (consensus 6.085 M) with a reported value of 5.85 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 were down again in April from the prior month, as housing supply continues to fall short of demand. We’ll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes. The falling number of homeowners in mortgage forbearance will also bring about more inventory.
Despite the decline, housing demand is still strong compared to one year ago, evidenced by home sales from this January to April, which are up 20% compared to 2020. The additional supply projected for the market should cool down the torrid pace of price appreciation later in the year.
First-time buyers in particular are having trouble securing that first home for a multitude of reasons, including not enough affordable properties, competition with cash buyers and properties leaving the market at such a rapid pace.
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 $341,600, up 19.1% from April 2020 ($286,800), as every region recorded price increases. This is a record high and marks 110 straight months of year-over-year gains.
According to the NAR;
First-time buyers were responsible for 31% of sales in April, down from 32% in March and 36% in April 2020. NAR’s 2020 Profile of Home Buyers and Sellers – released in late 20204 – revealed that the annual share of first-time buyers was 31%.
“First-time buyers in particular are having trouble securing that first home for a multitude of reasons, including not enough affordable properties, competition with cash buyers and properties leaving the market at such a rapid pace,” Yun said.
Individual investors or second-home buyers, who account for many cash sales, purchased 17% of homes in April, up from 15% in March and 10% in April 2020. All-cash sales accounted for 25% of transactions in April, up from both 23% in March and 15% in April 2020.
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory at the end of April amounted to 1.16 million units, up 10.5% from March’s inventory and down 20.5% from one year ago (1.46 million). Unsold inventory sits at a 2.4-month supply at the current sales pace, slightly up from March’s 2.1-month supply and down from the 4.0-month supply recorded in April 2020. These numbers continue to represent near-record lows. 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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