November 2017 Residential Sales, Inventory and Prices

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Sales of new single-family houses in November 2017 were at a seasonally adjusted annual rate (SAAR) of 733,000 units (650,000 expected). That is 17.5% (±10.4%) above the revised October rate of 624,000 and is 26.6% (±16.6%) above the November 2016 SAAR of 579,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +30.0%. For longer-term perspectives, not-seasonally adjusted sales were 47.2% below the “housing bubble” peak and 0.5% below the long-term, pre-2000 average.

The median sales price of new houses sold was $318,700 (-$900 or 0.3% MoM); meanwhile, the average sales price tumbled to $377,100 (-$17,600 or 4.5%). Starter homes (defined here as those priced below $200,000) comprised 11.5% of the total sold, down from the year-earlier 15.0%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 1.9% of those sold in November, down from the year-earlier 2.5%.

* 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 fell by 36,000 units (-4.6%). The combination of decreasing completions and rising sales (+109,000 units; +17.5%) caused months of inventory to contract by 0.8 month; oddly, new-home inventory was stable in absolute terms (at 283,000 units), however. 

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Existing home sales jumped by 310,000 units (+5.6%) in November, to a SAAR of 5.810 million units (5.52 million expected). Inventory of existing homes shrank in both absolute (-130,000 units) and months-of-inventory (-0.5 month) terms. Because new-home sales increased proportionally more quickly than existing-home sales, the share of total sales comprised of new homes ticked higher, to 11.2%. The median price of previously owned homes sold in November advanced to $248,000 (+$2,000 or 0.8% MoM). 

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Housing affordability improved marginally as the median price of existing homes for sale in October fell by $800 (-0.3%; +5.4 YoY), to $248,300. 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% (+6.2% YoY) -- marking a new all-time high for the index.

“Home prices continue their climb supported by low inventories and increasing sales,” said David Blitzer, Managing Director & Chairman of the Index Committee at S&P Dow Jones Indices. “Nationally, home prices are up 6.2% in the 12 months to October, three times the rate of inflation. Sales of existing homes dropped 6.1% from March through September; they have since rebounded 8.4% in November. Inventories measured by months-supply of homes for sale dropped from the tight level of 4.2 months last summer to only 3.4 months in November.

“Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth. Some of these favorable factors may shift in 2018. The Fed is widely expected to raise the Fed funds rate three more times to reach 2% by the end of the New Year. Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting. Data published by the Urban Institute suggests that in some West coast cities with rapidly rising home prices, renting is more attractive than buying.” 

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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.