January 2015 U.S. Home Sales, Inventory and Prices

Click image for larger view 

Click image for larger view

Sales of new single-family homes edged lower in January, by 1,000 units (-0.2%) relative to the previous month, to a seasonally adjusted and annualized rate (SAAR) of 481,000. Sales have been essentially flat (averaging 437,000) since January 2013. Sales in January were 9.1% above year-earlier levels.

Meanwhile, the median price of new homes sold declined by $7,800 (-2.6%) to $294,300. The average price of homes sold retreated by a substantial $30,400 (-8.0%), implying that lower-end homes comprised a larger share of new-home sales in January than in December. Because single-family starts decreased faster than sales in January, the three-month average ratio of starts to sales dropped to 1.48; that ratio is just a shade higher than the average since January 1995. 

Click image for larger view

As mentioned in our post on January’s housing permits, starts and completions, single-unit completions retreated by 15,000 units (-2.3%). New-home inventory expanded in absolute (+3,000 units) terms while months of inventory was unchanged. 

Existing home sales plunged to a nine-month low in January (-250,000 units or 4.9%) to 4.82 million units (SAAR); expectations were for a drop to 4.95 million. Because sales of new homes fell more slowly than existing homes, the share of total sales comprised of new homes rose to 9.1% (the largest share since August 2008). The median price of previously owned homes sold in January dipped by $8,600 (-4.1%) to $199,600. Inventory of existing homes rose in both absolute (+10,000 units) and months of inventory (+0.3 month).

Click image for larger view

Housing affordability edged lower in December as the median price of existing homes for sale rose by $2,300 (+1.1%) to $210,200. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P/Case-Shiller Home Price indices posted a not-seasonally adjusted monthly change of less than -0.1% in December (+4.6% relative to a year earlier).

David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices observed that “the housing recovery is faltering” despite continued low interest rates and positive consumer confidence. “While prices and sales of existing homes are close to normal, construction and new home sales remain weak. Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession.”

“Movements in home prices show clear regional patterns,” Blitzer continued. “The regional patterns and the weakness in new construction and new sales may reflect decreasing mobility -- fewer people moving to different parts of the country or seeking jobs in different regions.” 

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.