September 2016 Residential Sales, Inventory and Prices

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Sales of new single-family houses in September 2016 were at a seasonally adjusted annual rate (SAAR) of 593,000 units (601,000 expected). This was 3.1 percent (±16.2%)* above the revised August rate of 575,000 (originally 609,000) and 29.8 percent (±23.4%) above the September 2015 SAAR of 457,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +31.4%. For a longer-term perspective, September sales were 57.3% below the “bubble” peak and 12.0% below the long-term, pre-2000 average. Not only was August’s sales estimate revised down by 34,000 units, but July (-30,000) and June (-21,000) were also trimmed.

The median sales price of new houses sold in September jumped by $19,700 to $313,500; the average sales price rose even more: +$21,500 (to $377,700). Starter homes (those priced below $200,000) made up 15.2% of the total sold, 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. Homes priced below $150,000 made up 2.2% of those sold in September, a decline of nearly two-thirds from September 2015’s previous record-low proportion of 5.7%.

* 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 September, single-unit completions fell by 16,000 units (-8.8%). Because completions declined while sales increased, new-home inventory shrank in both absolute (-1,000 units) and months of inventory (-0.1 month) terms. 

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Existing home sales increased by 170,000 units (+3.2%) in September, to 5.47 million units (SAAR), well above expectations of 5.35 million. Inventory of existing homes expanded in absolute terms (+30,000 units) but shrank in months-of-inventory (-0.1 month) terms. Because both new- and existing-home sales increased by roughly the same percentage change (+3.2%), the share of total sales comprised of new homes remained at 9.8%. The median price of previously owned homes sold in September fell by $5,700 (-2.4%), to $234,200. 

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Housing affordability marginally improved as the median price of existing homes for sale in August fell by $2,900 (-1.2%; but +5.3 YoY), to $242,200. 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 +0.5% (+5.3% YoY), bringing home prices back essentially to 2006 levels.

“Supported by continued moderate economic growth, home prices extended recent gains,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “All 20 cities saw prices higher than a year earlier with 10 enjoying larger annual gains than last month. The seasonally adjusted month-over-month data showed that home prices in 14 cities were higher in August than in July. Other housing data including sales of existing single family homes, measures of housing affordability, and permits for new construction also point to a reasonably healthy housing market.

“With the national home price index almost surpassing the peak set 10 years ago, one question is how the housing recovery compares with the stock market recovery. Since the last recession ended in June 2009, the stock market as measured by the S&P 500 rose 136% to the end of August while home prices are up 23%. However, home prices did not reach bottom until February 2012, almost three years later. Using the 2012 date as the starting point, home prices are up 38% compared to 59% for stocks. While the stock market recovery has been greater than the rebound in home prices, the value of Americans’ homes at about $22.3 trillion is slightly larger than the value of stocks and mutual funds at $21.2 trillion.” 

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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.