June 2017 Residential Sales, Inventory and Prices

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Sales of new single-family houses in June 2017 were at a seasonally adjusted annual rate (SAAR) of 610,000 (612,000 expected). This is 0.8% (±12.1%)* above the revised May rate of 605,000 (originally 610,000 units) and 9.1% (±14.4%)* above the June 2016 SAAR of 559,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +10.0%. For a longer-term perspective, sales were 56.1% below the “housing bubble” peak but 10.0% above the long-term, pre-2000 average.

The median sales price of new houses sold in June 2017 was $310,800 (-$13,500 or 4.2% MoM). The average sales price was $379,500 (-$1,900 or 0.5% MoM). Starter homes (defined here as those priced below $200,000) comprised 14.6% of the total sold, up from June 2016’s 14.0%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.6% of those sold in June, a proportion nearly double that of a year earlier (2.0%).

* 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 3,000 units (+0.4%). Although the increase in completions was eclipsed by that of sales, new-home inventory expanded in both absolute (+3,000 units) and months-of-inventory terms (+0.1 month). 

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Existing home sales fell by 100,000 units (-1.8%) in June, to a SAAR of 5.520 million units (5.580 million expected). Inventory of existing homes shrank in absolute terms (-10,000 units) but expanded in months-of-inventory (+0.1 month) terms. With new-home sales increasing and existing-home sales decreasing, the share of total sales comprised of new homes rose to 10.0%. The median price of previously owned homes sold in June increased by $11,300 (+4.5% MoM), to a new all-time high of $263,800. 

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Housing affordability deteriorated for a seventh month as the median price of existing homes for sale in May jumped by $8,300 (+3.4%; +6.0 YoY), to $254,600. 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 +1.0% (+5.6% YoY) -- marking the sixth consecutive all-time high for the index.

“Home prices continue to climb and outpace both inflation and wages,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Housing is not repeating the bubble period of 2000-2006: price increases vary across the country unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging. The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.

“For the last 19 months, either Seattle or Portland OR was the city with fastest rising home prices based on 12-month gains. Since the national index bottomed in February 2012, San Francisco has the largest gain. Using Census Bureau data for 2011 to 2015, it is possible to compare these three cities to national averages. The proportion of owner-occupied homes is lower than the national average in all three cities with San Francisco being the lowest at 36%, Seattle at 46%, and Portland at 52%. Nationally, the figure is 64%. The key factor for the rise in home prices is population growth from 2010 to 2016: the national increase is 4.7%, but for these cities, it is 8.2% in San Francisco, 9.6% in Portland and 15.7% in Seattle. A larger population combined with more people working leads to higher home prices.” 

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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.