April 2017 Residential Sales, Inventory and Prices

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Sales of new single-family houses in April 2017 were at a seasonally adjusted annual rate (SAAR) of 569,000 units (604,000 expected). This is 11.4 percent (±10.5 percent) below the revised March rate of 642,000 (originally 621,000), but is 0.5 percent (±11.3 percent)* above the April 2016 SAAR of 566,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -1.8%. For a longer-term perspective, April sales were 59.0% below the “bubble” peak but 3.3% above the long-term, pre-2000 average.

The median sales price of new houses sold in April 2017 was $309,200 (-$9,500 or 3.0%). The average sales price was $368,300 (-$17,100 or 4.4%). Starter homes (those priced below $200,000) comprised 11.1% of the total sold, down from April 2016’s 18.2%, and a new record low for the month of April (since 2002); prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 1.9% of those sold in April, also a new record low for that month of the year.

* 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 fell by 37,000 units (-4.5%). Since the decrease in sales outpaced that of completions, new-home inventory expanded in both absolute (+4,000 units) and months-of-inventory (+0.8 month) terms. 

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Existing home sales dropped by 130,000 units (-2.3%) in March, to a SAAR of 5.570 million units (5.650 million expected). Inventory of existing homes expanded in both absolute (+130,000 units) and months-of-inventory (+0.4 month) terms. With new-home sales decreasing at a proportionately faster rate than existing-home sales, the share of total sales comprised of new homes fell back to 9.3%. The median price of previously owned homes sold in April increased by $8,200 (+3.5%), to $244,800. 

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Housing affordability retreated for a fifth month as the median price of existing homes for sale in March jumped by $8,000 (+3.5%; +6.6 YoY), to $237,800. 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 +0.8% (+5.8% YoY) -- marking the fourth consecutive all-time high for the index.

“Home prices continue rising with the S&P Corelogic Case-Shiller National Index up 5.8% in the year ended March, the fastest pace in almost three years,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “While there is some regional variation, prices are rising across the United States. Half of the 20 cities tracked by the S&P Corelogic Case-Shiller indices rose more than 6% from March 2016 to March 2017. The smallest gain of 4.1%, in New York, was roughly double the rate of inflation.

“Sales of both new and existing homes, housing starts and the National Association of Home Builders’ sentiment index are all trending higher. Over the last year, analysts suggested that one factor pushing prices higher was the unusually low inventory of homes for sale. People are staying in their homes longer rather than selling and trading up. If mortgage rates, currently near 4%, rise further, this could deter more people from selling and keep pressure on inventories and prices. While prices cannot rise indefinitely, there is no way to tell when rising prices and mortgage rates will force a slowdown in housing.” 

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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.