August 2017 Residential Sales, Inventory and Prices

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Sales of new single-family houses in August 2017 were at a seasonally adjusted annual rate (SAAR) of 560,000 units (583,000 expected). This is 3.4% (±13.0%)* below the revised July rate of 580,000 (originally 571,000 units) and 1.2% (±18.5%)* below the August 2016 SAAR of 567,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -2.2%. For a longer-term perspective, sales were 59.7% below the “housing bubble” peak and 13.9% below the long-term, pre-2000 average.

The median sales price of new houses sold was $300,200 (-$19,700 or 6.2% MoM). The average sales price was $368,100 (-$3,200 or 0.9% MoM). Starter homes (defined here as those priced below $200,000) comprised 13.3% of the total sold, down from August 2016’s 17.4%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 4.44% of those sold in August, little changed from a year earlier (4.35%).

* 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 August, single-unit completions fell by 111,000 units (-13.3%). Despite the decrease in completions eclipsing that of sales, new-home inventory expanded in both absolute (+10,000 units) and months-of-inventory terms (+0.4 month). 

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Existing home sales fell by 90,000 units (-1.7%) in August, to a SAAR of 5.350 million units (5.480 million expected). Inventory of existing homes shrank in absolute terms (-40,000 units) but was unchanged in months-of-inventory terms. Despite new-home sales decreasing more slowly than existing-home sales, the share of total sales comprised of new homes retreated fractionally to 9.5%. The median price of previously owned homes sold in August decreased by $4,600 (-1.8% MoM). 

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Housing affordability improved marginally as the median price of existing homes for sale in July fell by $4,900 (-1.8%; +6.3 YoY), to $260,600. 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 +0.7% (+5.9% YoY) -- marking a new all-time high for the index.

“Home prices over the past year rose at a 5.9% annual rate,” says David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Consumers, through home buying and other spending, are the driving force in the current economic expansion. While the gains in home prices in recent months have been in the Pacific Northwest, the leadership continues to shift among regions and cities across the country. Dallas and Denver are also experiencing rapid price growth. Las Vegas, one of the hardest hit cities in the housing collapse, saw the third fastest increase in the year through July 2017.

“While home prices continue to rise, other housing indicators may be leveling off. Sales of both new and existing homes have slipped since last March. The Builders Sentiment Index published by the National Association of Home Builders also leveled off after March. Automobiles are the second largest consumer purchase most people make after houses. Auto sales peaked last November and have been flat to slightly lower since. The housing market will face two contradicting challenges during the rest of 2017 and into 2018. First, rebuilding following hurricanes across Texas, Florida and other parts of the south will lead to further supply pressures. Second, the Fed’s recent move to shrink its balance sheet could push mortgage rates upward.” 

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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.