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Tuesday, August 30, 2016

July 2016 Residential Sales, Inventory and Prices

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Sales of new single-family houses in July 2016 were at a seasonally adjusted annual rate (SAAR) of 654,000 units -- well above expectations of 580,000. This was 12.4 percent (±12.7%)* above the revised June rate of 582,000 (originally 592,000 units) and 31.3 percent (±19.9%) above the July 2015 SAAR of 498,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +32.6%. For a longer-term perspective, July’s sales were 53% below the “bubble” peak and 9% above the long-term, pre-2000 average.
Because single-family starts were essentially flat in July while sales increased, the three-month average ratio of starts to sales dropped to 1.26 -- below above the average (1.41) since January 1995.
The median sales price of new houses sold in July 2016 fell by $15,900 to $294,600; the average sales price was $355,800 (+$2,300). Starter homes (those priced below $200,000) made up 17.5% of the total sold in July, the lowest proportion on record for that calendar month (going back to 2002); prior to the Great Recession starter homes comprised as much as 61% 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 July, single-unit completions declined by 3,000 units (-0.4%). Because completions decreased while sales rose, new-home inventory shrank in both absolute (-7,000 units) and months of inventory (-0.6 month) terms. 
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Existing home sales plummeted by 180,000 units (-3.2%) in July to 5.39 million units (SAAR), below expectations of 5.52 million. Inventory of existing homes expanded in both absolute (+20,000 units) and months-of-inventory (+0.2 month) terms. Because new-home sales jumped while existing-home sales decreased, the share of total sales comprised of new homes rose to 10.8% -- breaking through 10% for the first time in nearly eight years. The median price of previously owned homes sold in July retreated by $3,500 (-1.4%), to $244,100. 
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Housing affordability deteriorated as the median price of existing homes for sale in June increased by another $9,500 (+4.0%; +5.0 YoY) to a new record $249,800. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P CoreLogic Case-Shiller Home Price indices posted a not-seasonally adjusted monthly change of +1.0% (+5.1% YoY).
 “Home prices continued to rise across the country led by the west and the south,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “In the strongest region, the Pacific Northwest, prices are rising at more than 10%; in the slower Northeast, prices are climbing a bit faster than inflation. Nationally, home prices have risen at a consistent 4.8% annual pace over the last two years without showing any signs of slowing.
“Overall, residential real estate and housing is in good shape. Sales of existing homes are at running at about 5.5 million units annually with inventory levels under five months, indicating a fairly tight market. Sales of new single family homes were at a 654,000 seasonally adjusted annual rate in July, the highest rate since November 2007. Housing starts in July topped an annual rate of 1.2 million units. While the real estate sector and consumer spending are contributing to economic growth, business capital spending continues to show weakness.” 
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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.

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