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

Click image for larger view 

Click image for larger view

Sales of new single-family homes retreated by 10,000 units (-2.4 percent), to a seasonally adjusted and annualized rate (SAAR) of 412,000 in July. Despite the month-to-month decline, sales in July were 12.1 percent above year-earlier levels. Meanwhile, the median price of new homes sold fell (by $10,300 or 3.7 percent) to $269,800. Although single-family starts increased while sales fell, the three-month average starts-to-sales ratio was essentially unchanged at 1.47. Click here for our post on June’s housing permits, starts and completions.

Click image for larger view

Single-unit completions rose (37,000 units or 6.2 percent) in July. As a result, new-home inventory expanded in both absolute and months-of-inventory terms (8,000 units or 0.5 month). 

Click image for larger view

Existing home sales advanced in July, by 120,000 units (2.4 percent) to 5.15 million units (SAAR). With sales of existing homes rising but new homes falling, the share of total sales comprised of new homes shrank to 7.4 percent. The median price of previously owned homes sold in June inched higher (by $900 or 0.4 percent) to $222,900. Inventory of existing homes increased in absolute terms (+80,000 units) but was unchanged in months-of-inventory terms.

Click image for larger view

Housing affordability tumbled in June, to its lowest level since November 2008, because the median price of existing homes for sale rose by $12,300 to $224,300. Concurrently, Standard & Poor’s reported that the newly published U.S. National Index in the S&P/Case-Shiller Home Price indices posted a not-seasonally adjusted monthly change of +0.9 percent in June (+6.2 percent relative to a year earlier).

“Home price gains continue to ease as they have since last fall,” observed David Blitzer, Chair of the Index Committee at S&P Dow Jones Indices. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators -- starts, existing home sales and builders’ sentiment -- are positive. Taken together, these point to a more normal housing sector.

“The monthly National Index rose 0.9% in June. While all 20 cities saw higher home prices over the last 12 months, all experienced slower gains. In San Francisco, the pace of price increases halved since late last summer. The Sun Belt cities -- Las Vegas, Phoenix, Miami and Tampa -- all remain a third or more below their peak prices set almost a decade ago.

“Bargain basement mortgage rates won’t continue forever; recent improvements in the labor markets and comments from Fed chair Janet Yellen and others hint that interest rates could rise as soon as the first quarter of 2015. Rising mortgage rates won’t send housing into a tailspin, but will further dampen price gains.” 

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.