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Sales of new
single-family homes edged higher in May (+12,000 units or 2.2%), to a
seasonally adjusted and annualized rate (SAAR) of 546,000 (slightly above the 525,000
expected).
That rate is the highest since February 2008; for a long-term perspective,
however, it is comparable to levels previously seen in 1992. Sales in May were 18.6%
above year-earlier levels; year-to-date (YTD), sales were 22.8% above the same
months in 2014.
Meanwhile,
the median price of new homes sold dropped by $8,300 (-2.9%) to $282,800. The average
price of homes sold advanced by $3,100 (+0.9%). Because single-family starts increased
more quickly than sales, the three-month average ratio of starts to sales nudged
up to 1.28 -- below the average (1.41) since January 1995.
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As
mentioned in our post
on May’s housing permits, starts and completions, single-unit completions decreased
by 35,000 units (-5.2%). Despite the rise in sales and drop in completions, new-home
inventory was unchanged in absolute terms but months of inventory shrank (-0.1
month).
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Existing home sales
jumped in May (+260,000 units or 5.1%) to 5.35 million units (SAAR); that
result was slightly above expectations
of 5.25 million. Because sales of existing homes outpaced new homes, the share
of total sales comprised of new homes bumped down to 9.3%. The median price of previously
owned homes sold in May rose by $10,000 (+4.6%) to $228,700. Inventory of
existing homes expanded in absolute terms (+70,000 units) but months-of-inventory
shrank (-0.1 month).
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Housing
affordability suffered in April, as the median price of existing homes for
sale rose by $9,100 (+4.3%) to $221,200. 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 +1.1% in April (+4.2% relative
to a year earlier).
“Home prices continue to rise across the
country, but the pace is not accelerating,” said David
Blitzer, Managing Director and Chairman of the Index Committee at S&P
Dow Jones Indices. “Moreover, consumer expectations are consistent with the
current pace of price increases. A recent national survey published by the New
York Fed showed the average expected price increase among both owners and
renters is 4.1%. Both the current rate of home price increases and the
consumers’ expectations are a bit lower than the long term annual price change
of 4.9% since 1975. These figures, however, do not adjust for inflation. The
real, or inflation adjusted, price change since 1975 is one percent per year.
Given the current inflation rate of under two percent, real home prices today
are rising more quickly than is typical. The three out of five consumers in the
survey who see home ownership as a good or somewhat good investment may be
thinking in real terms.
“Recent
housing data is positive. Sales of new and existing homes are rising in recent
reports and construction of new homes enjoyed strong gains in May. At the same
time, the proportion of new construction that is apartments rather than single
family homes remains high. In the past year, 34% of housing starts were
apartments, compared to 22% on average since 1975. One aspect of this may be
condominiums. Separately, S&P Dow Jones Indices reports the
S&P/Case-Shiller Condo Price indices for Los Angeles, San Francisco,
Chicago, Boston and New York. In all but LA, condo prices are rising faster
than single family homes.”
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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.
