June 2016 Residential Sales, Inventory and Prices

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Sales of new single-family houses in June 2016 were at a seasonally adjusted annual rate (SAAR) of 592,000 -- beating expectations of 562,000. That was 3.5 percent (±23.9%)* above the revised May rate of 572,000 (originally 551,000 units) and 25.4 percent (±27.9%)* above the June 2015 SAAR of 472,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +22.7%. For a longer-term perspective, June’s sales were 57% below the “bubble” peak and only 3% above the long-term, pre-2000 average; one commentator pointed out that June’s sales rate was equivalent to that seen in January 1963 -- the first year sales data were collected.

Because single-family starts went essentially nowhere during 2Q while sales increased, the three-month average ratio of starts to sales dropped to 1.32 -- below above the average (1.41) since January 1995.

The median price of new houses sold in June 2016 rose ($17,900) to $306,700; the average sales price was $358,200 (+$6,800). Starter homes (those priced below $200,000) made up 14.8% of the total sold in June, 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 June, single-unit completions rose by 27,000 units (+3.7%). Because completions increased at roughly the same rate as sales, new-home inventory expanded in absolute terms (+3,000 units) but shrank in terms of months of inventory (-0.2 month). 

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Existing home sales rose in June (+60,000 units or 1.1%) to 5.57 million units (SAAR), on par with expectations of 5.57 million. Inventory of existing homes shrank in both absolute (-20,000 units) and months-of-inventory (-0.1month) terms. Although new-home sales increased at a slower pace than existing-home sales, the share of total sales comprised of new homes rose to 9.6%. The median price of previously owned homes sold in June advanced by $8,800 (+3.7%), to a new all-time high of $247,700. 

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Housing affordability deteriorated as the median price of existing homes for sale in May increased by another $9,000 (+3.9%; +4.6% YoY) to a record $241,000. 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 +1.2% (+5.0% YoY).

“Home prices continue to appreciate across the country,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Overall, housing is doing quite well. In addition to strong prices, sales of existing homes reached the highest monthly level since 2007 as construction of new homes showed continuing gains. The SCE Housing Expectations Survey published by the New York Federal Reserve Bank shows that consumers expect home prices to continue rising, though at a somewhat slower pace.”

“Regional patterns seen in home prices are shifting. Over the last year, the Pacific Northwest has been quite strong while prices in the previously strong spots of San Diego, San Francisco and Los Angeles saw more modest increases. The two hottest areas during the housing boom were Florida and the Southwest. Miami and Tampa have recovered in the last few months while Las Vegas and Phoenix remain weak. When home prices began to recover, New York and Washington saw steady price growth; now both are among the weakest areas in the country.” 

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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.