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Tuesday, August 29, 2017

July 2017 Residential Sales, Inventory and Prices

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Sales of new single-family houses in July 2017 were at a seasonally adjusted annual rate (SAAR) of 571,000 units (610,000 expected). This is 9.4% (±12.9%)* below the revised June rate of 630,000 (originally 610,000 units) and 8.9% (±15.4%)* below the July 2016 SAAR of 627,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -9.3%. For a longer-term perspective, sales were 58.9% below the “housing bubble” peak and 6.3% below the long-term, pre-2000 average.
The median sales price of new houses sold in July 2017 was $313,700 (+$2,100 or 0.7% MoM). The average sales price was $371,200 (-$1,200 or 0.3% MoM). Starter homes (defined here as those priced below $200,000) comprised 16.3% of the total sold, down from July 2016’s 18.5%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 2.0% of those sold in July, a proportion nearly half that of a year earlier (3.7%).
* 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 July, single-unit completions fell by 13,000 units (-1.6%). Because the decrease in completions was eclipsed by that of sales, new-home inventory expanded in both absolute (+4,000 units) and months-of-inventory terms (+0.6 month). 
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Existing home sales fell by 70,000 units (-1.3%) in July, to a SAAR of 5.440 million units (5.570 million expected). Inventory of existing homes shrank in absolute terms (-20,000 units) but was unchanged in months-of-inventory terms. With new-home sales decreasing at about the same rate as existing-home sales, the share of total sales comprised of new homes dropped to 9.5%. The median price of previously owned homes sold in July decreased by $5,000 (-1.9% MoM) from June’s all-time high of $263,300. 
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Housing affordability deteriorated for an eighth month as the median price of existing homes for sale in June jumped by $11,900 (+4.7%; +6.6 YoY), to $266,200. 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 +0.9% (+5.8% YoY) -- marking a new all-time high for the index.
“The trend of increasing home prices is continuing,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Price increases are supported by a tight housing market. Both the number of homes for sale and the number of days a house is on the market have declined for four to five years. Currently the months-supply of existing homes for sale is low, at 4.2 months. In addition, housing starts remain below their pre-financial crisis peak as new home sales have not recovered as fast as existing home sales.”
“Rising prices are the principal factor driving affordability down. However, other drivers of affordability are more favorable: the national unemployment rate is down, and the number of jobs created continues to grow at a robust pace, rising to close to 200,000 per month. Wages and salaries are increasing, maintaining a growth rate a bit ahead of inflation. Mortgage rates, up slightly since the end of 2016, are under 4%. Given current economic conditions and the tight housing market, an immediate reversal in home price trends appears unlikely.” 
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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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