Written by Steven Hansen
The headline existing home sales grew relative to last month with the NAR stating “ Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available”.
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. The unadjusted data shows a decline in home sales from July 2020 – and not sure how one can say the seasonally adjusted data improved.
We consider this report worse than last month.
Econintersect Analysis
- The unadjusted sales rate of growth decelerated 23.5 % month-over-month, down 2.2 % year-over-year – sales growth rate trend slowed using the 3-month moving average.
- The unadjusted price rate of growth decelerated by 3.9 % month-over-month, up 12.0 % year-over-year
- The homes for sale unadjusted inventory accelerated 8.1 % this month compared to last month and is down 12.0 % year-over-year
- Sales up 2.0 % month-over-month, up 1.5 % year-over-year (reported last month +22.9 % year-over-year – all due to comparisons to the end of the lockdown period one year ago)
- Median prices up 17.8 % year-over-year
- The market (from Econoday) expected an existing home sales level of 5.560 M to 5.950 M (consensus 5.830 M) with a reported value of 5.99 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:
We see inventory beginning to tick up, which will lessen the intensity of multiple offers. Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.
Although we shouldn’t expect to see home prices drop in the coming months, there is a chance that they will level off as inventory continues to gradually improve.
In the meantime, some prospective buyers who are priced out are raising the demand for rental homes and thereby pushing up the rental rates.
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 price3 for all housing types in July was $359,900, up 17.8% from July 2020 ($305,600), as each region saw prices climb. This marks 113 straight months of year-over-year gains.
According to the NAR;
First-time buyers accounted for 30% of sales in July, down from 31% in June and down from 34% in July 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%.
Individual investors or second-home buyers, who account for many cash sales, purchased 15% of homes in July, up from 14% in June but even with 15% from July 2020. All-cash sales accounted for 23% of transactions in July, even with June and up from 16% in July 2020.
Unadjusted Inventories are below the levels of one year ago.
Total housing inventory2 at the end of July totaled 1.32 million units, up 7.3% from June’s supply and down 12.0% from one year ago (1.50 million). Unsold inventory sits at a 2.6-month supply at the present sales pace, up slightly from the 2.5-month figure recorded in June but down from 3.1 months in July 2020.
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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