January 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in January 2018 were at a seasonally adjusted annual rate (SAAR) of 593,000 units (600,000 expected). This is 7.8% (±19.0%)* below the revised December rate of 643,000 (originally 625,000 units) and 1.0% (±16.4%)* below the January 2017 SAAR of 599,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -2.2%. For longer-term perspectives, not-seasonally adjusted sales were 57.3% below the “housing bubble” peak and 15.8% below the long-term, pre-2000 average.

The median sales price of new houses sold in January 2018 was $323,000 (-$13,700 or 4.1% MoM); meanwhile, the average sales price fell to $382,700 (-$11,900 or 3.0%). Starter homes (defined here as those priced below $200,000) comprised 11.4% of the total sold, up from the year-earlier 13.3%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 2.3% of those sold in January, down from the year-earlier 4.4%.

* 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 January, single-unit completions rose by 18,000 units (+2.2%). The combination of increasing completions and falling sales (50,000 units; -7.8%) caused months of inventory for sale to expand in both absolute and months-of-inventory terms (7,000 units; +0.6 month). 

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Existing home sales fell by 180,000 units (-3.2%) in January, to a SAAR of 5.380 million units (5.65 million expected). As a result, inventory of existing homes for sale expanded in both absolute (+60,000 units) and months-of-inventory (+0.2 month) terms. Because new-home sales decreased proportionally more quickly than existing-home sales, the share of total sales comprised of new homes declined, to 9.9%. The median price of previously owned homes sold in January retreated to $240,500 (-$6,000 or 2.4% MoM). 

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Housing affordability improved marginally as the median price of existing homes for sale in December slipped by $300 (-0.1%; +5.7 YoY), to $247,900. 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% (+6.3% YoY) -- marking a new all-time high for the index.

“The rise in home prices should be causing the same nervous wonder aimed at the stock market after its recent bout of volatility,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Across the 20 cities covered by S&P Corelogic Case Shiller Home Price Indices, the average increase from the financial crisis low is 62%; over the same period, inflation was 12.4%. None of the cities covered in this release saw real, inflation-adjusted prices fall in 2017. The National Index, which reached its low point in 2012, is up 38% in six years after adjusting for inflation, a real annual gain of 5.3%. The National Index’s average annual real gain from 1976 to 2017 was 1.3%. Even considering the recovery from the financial crisis, we are experiencing a boom in home prices.

“Within the last few months, there are beginning to be some signs that gains in housing may be leveling off. Sales of existing homes fell in December and January after seasonal adjustment and are now as low as any month in 2017. Pending sales of existing homes are roughly flat over the last several months. New home sales appear to be following the same trend as existing home sales. While the price increases do not suggest any weakening of demand, mortgage rates rose from 4% to 4.4% since the start of the year. It is too early to tell if the housing recovery is slowing. If it is, some moderation in price gains could be seen later this year.” 

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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.