November 2016 Residential Sales, Inventory and Prices

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Sales of new single-family houses in November 2016 were at a seasonally adjusted annual rate (SAAR) of 592,000 units (580,000 expected). That was 5.2 percent (±14.1%)* above the revised October rate of 563,000 and 16.5 percent (±19.3%)* above the November 2015 estimate of 508,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +13.9%. For a longer-term perspective, November sales were 57.4% below the “bubble” peak and 21.6% below the long-term, pre-2000 average.

The median sales price of new houses sold in November rose to $305,400 (+$2,700 or 0.9%); the average sales price increased by $5,200 (1.5%) to $359,900. Starter homes (those priced below $200,000) comprised 14.6% of the total sold, up from November 2015’s record-low 11.1% for that calendar month (going back to 2002); prior to the Great Recession starter homes represented as much as 61% of total sales. Homes priced below $150,000 made up 2.4% of those sold in November, a further slide from November 2015’s previous record-low share of 2.8%.

* 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 November, single-unit completions rose by 25,000 units (+3.3%). Because completions and sales were nearly balanced, new-home inventory expanded in absolute terms (+4,000 units) but shrank in months of inventory terms (-0.1 month). 

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Existing home sales increased by 40,000 units (+0.7%) in November, to 5.61 million units (SAAR), well above expectations of 5.35 million. Inventory of existing homes shrank in both absolute (-160,000 units) and months-of-inventory (-0.3 month) terms. Although existing-home sales outpaced those of new homes in November, the share of total sales comprised of new homes expanded to 9.5%. The median price of previously owned homes sold in November edged up by $800 (0.3%), to $234,900. 

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Housing affordability marginally improved as the median price of existing homes for sale in October fell by $3,200 (-1.4%; but +5.9 YoY), to $233,700. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices posted a not-seasonally adjusted monthly change of +0.2% (+5.6% YoY), bringing home prices to a new all-time high.

“Home prices and the economy are both enjoying robust numbers,” said David Blitzer, Managing Director & Chairman of the Index Committee at S&P Dow Jones Indices. “However, mortgage interest rates rose in November and are expected to rise further as home prices continue to outpace gains in wages and personal income. Affordability measures based on median incomes, home prices and mortgage rates show declines of 20-30% since home prices bottomed in 2012. With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends. Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”

“After the S&P CoreLogic Case-Shiller National Index bottomed in February 2012, its year-over-year growth accelerated to a peak rate of 10.9% in October 2013 and then gradually fell to its current rate of approximately 5%. During the same period, the highest year-over-year rate from any city was 29% in August and September 2013; currently the highest single city gain declined to approximately 11%. Both national and city growth in home prices slowed but remains above the growth rate of incomes and inflation.” 

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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.