February 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in February 2018 were at a seasonally adjusted annual rate (SAAR) of 618,000 units (630,000 expected). This is 0.6% (±13.3%)* below the revised January rate of 622,000 (originally 593,000 units), but is 0.5% (±16.6%)* above the February 2017 SAAR of 615,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was 0.0%. For longer-term perspectives, not-seasonally adjusted sales were 55.5% below the “housing bubble” peak and 2.5% below the long-term, pre-2000 average.

The median sales price of new houses sold in February 2018 was $326,800 (+$1,900 or 0.6% MoM); meanwhile, the average sales price edged down to $376,700 (-$400 or 0.1%). Starter homes (defined here as those priced below $200,000) comprised 13.7% of the total sold, down from the year-earlier 17.6%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.9% of those sold in February, unchanged from a year earlier.

* 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 February, single-unit completions rose by 26,000 units (+3.0%). The combination of increasing completions and falling sales (4,000 units; -0.6%) caused months of inventory for sale to expand in both absolute and months-of-inventory terms (6,000 units; +0.1 month). 

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Existing home sales rose by 160,000 units (+3.0%) in February, to a SAAR of 5.540 million units (5.42 million expected). As a result, inventory of existing homes for sale expanded in absolute terms (+70,000 units) but remained stable in months-of-inventory terms. Because new-home sales decreased while existing-home sales rose, the share of total sales comprised of new homes declined, to 10.0%. The median price of previously owned homes sold in February nudged up to $241,700 (+$900 or 0.4% MoM). 

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Housing affordability improved modestly as the median price of existing homes for sale in January fell by $6,200 (-2.5%; +5.7 YoY), to $241,700. 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 less than +0.1% (+6.2% YoY) -- marking a new all-time high for the index.

“The home price surge continues,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Since the market bottom in December 2012, the S&P Corelogic Case-Shiller National Home Price index has climbed at a 4.7% real (inflation adjusted) annual rate. That is twice the rate of economic growth as measured by the GDP. While price gains vary from city to city, there are few, if any, really weak spots. Seattle, up 12.9% in the last year, continues to see the largest gains, followed by Las Vegas up 11.1% over the same period. Even Chicago and Washington, the cities with the smallest price gains, saw a 2.4% annual increase in home prices.

“Two factors supporting price increases are the low inventory of homes for sale and the low vacancy rate among owner-occupied housing. The current months-supply -- how many months at the current sales rate would be needed to absorb homes currently for sale -- is 3.4; the average since 2000 is 6.0 months, and the high in July 2010 was 11.9. Currently, the homeowner vacancy rate is 1.6% compared to an average of 2.1% since 2000; it peaked in 2010 at 2.7%. Despite limited supplies, rising prices, and higher mortgage rates, affordability is not a concern. Affordability measures published by the National Association of Realtors show that a family with a median income could comfortably afford a mortgage for a median priced home.” 

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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.