May 2014 U.S. Home Sales, Inventory and Prices

Click image for larger view 

Click image for larger view

Sales of new single-family homes jumped by a seasonally adjusted and annualized rate (SAAR) of 79,000 units (18.6 percent) to 504,000 in May. Sales were 22.5 percent above year-earlier levels. Meanwhile, the median price of new homes sold rose (by $12,300 or 4.6 percent) to $282,000. That increase recouped a bit more than three-fourths of April’s price decline. Because single-family starts dropped while sales increased during May, the three-month average starts-to-sales ratio retreated to 1.45 (from 1.49). Click here for our post on May housing permits, starts and completions.

Click image for larger view

Single-unit completions nudged higher (13,000 units or 2.1 percent) in May. Even so, new-home inventory remained unchanged in absolute terms but declined in months-of-inventory terms (-0.8 month). 

Click image for larger view

Existing home sales also advanced in May, by 230,000 units (4.9 percent) to 4.89 million units (SAAR). The share of total sales comprised of new homes rose to 9.3 percent -- the highest proportion since November 2008. The median price of previously owned homes sold in May increased (by $11,900 or 5.9 percent), to $213,400. Inventory of existing homes jumped in absolute terms (+50,000 units) but shrank in months-of-inventory (-0.1 month) terms.

Click image for larger view

Housing affordability dipped in March because the median price of existing homes for sale rose by $4,600 to $201,100. Concurrently, Standard & Poor’s reported that the 20-City Composite in the S&P/Case-Shiller Home Price indices posted a not-seasonally adjusted monthly change of +1.1 percent in April (+10.8 percent relative to a year earlier).

“Although home prices rose in April, the annual gains weakened,” observed David Blitzer, Chair of the Index Committee at S&P Dow Jones Indices. “Overall, prices are rising month-to-month but at a slower rate. Last year some Sunbelt cities were seeing year-over-year numbers close to 30 percent, now all are below 20 percent.... Other cities around the nation are also experiencing slower price increases.

“While the annual numbers worsened, the monthly figures were seasonally strong. Five cities -- Atlanta, Boston, Chicago, San Francisco and Seattle -- reported monthly gains of 2 percent or more. Dallas and Denver gained 1.6 percent and continue to set new peaks. Boston and Charlotte are less than 10 percent away from their peaks.

“Near term economic factors favor further gains in housing: mortgage rates are lower than a year ago, the Fed is expected to keep interest rates steady until mid-2015 and the labor market is improving. However, housing is not back to normal: prices are being supported by cash sales, low inventories and declining foreclosure and REO sales. First time home buyers are not back in force and qualifying for a mortgage remains challenging. The question is whether housing will bounce back before the Fed begins to tighten sometime next year.”

Click image for larger view

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.