April 2016 Residential Sales, Inventory and Prices

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Sales of new single-family houses in April 2016 were at a seasonally adjusted annual rate (SAAR) of 619,000 -- the highest number in eight years -- that “smashed” expectations of 523,000. The April estimate was 16.6 percent (±15.4%) above the revised March rate of 531,000 (originally 511,000 units) and is 23.8 percent (±22.8%) above the year-earlier SAAR of 500,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +27.1%. For a longer-term perspective, April’s sales were roughly 55% below the “bubble” peak but about 17% above the long-term, pre-2000 average.

Because the increase in single-family starts was less than one-third that of sales, the three-month average ratio of starts to sales dropped to 1.42 -- still above the average (1.41) since January 1995.

The median sales price of new houses sold in April jumped by $23,200 (7.8%), to a new all-time high of $321,100; the average sales price rose a corresponding $25,900 (7.3%), to $379,800. Starter homes (those priced below $200,000) made up 18.0% of the total sold in April, the lowest proportion on record for that calendar month (going back to 2002); prior to the Great Recession starter homes comprised as much as a 61% share of total sales.

* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero. 

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As mentioned in our post about housing permits, starts and completions in April, single-unit completions retreated by 26,000 units (-3.6%). Because completions decreased while sales increased, new-home inventory contracted in both absolute (-1,000 units) and months-of-inventory (0.8 month) terms. 

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Existing home sales rose in April (+90,000 units or 1.7%) to 5.45 million units (SAAR), slightly better than expectations of 5.40 million. Inventory of existing homes expanded in both absolute (+18,000 units) and months-of-inventory (+0.3 month) terms. Because the increase in new-home sales exceeded that of existing homes, the share of total sales comprised of new homes jumped to 10.2%. The median price of previously owned homes sold in April advanced by $11,600 (+5.0%), to $232,500. 

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Housing affordability deteriorated as the median price of existing homes for sale in March increased by another $10,700 (+5.0%; +5.8% YoY) to $224,300. 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 +0.7% (+5.2% YoY).

“Home prices are continuing to rise at a 5% annual rate, a pace that has held since the start of 2015,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates. Another factor behind rising home prices is the limited supply of homes on the market. The number of homes currently on the market is less than 2% of the number of households in the U.S., the lowest percentage seen since the mid-1980s.

“Price movements vary across the country. The Pacific Northwest and the West continue to be the strongest regions. Seattle, Portland, Oregon and Denver had the largest year-over-year price increases. These cities also saw some of the largest declines in unemployment rates among the 20 cities included in the S&P/Case-Shiller Indices. The Northeast and upper-Midwest regions were at the other end of the ranking. The four cities with the smallest year-over-year prices gains were Washington DC, Chicago, New York, and Cleveland. The unemployment rates in Chicago and Cleveland rose from March 2015 to March 2016.” 

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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.