April 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in April 2018 were at a seasonally adjusted annual rate (SAAR) of 662,000 units (677,000 expected). This is 1.5% (±11.8%)* below the revised March rate of 672,000 (originally 694,000 units), but 11.6% (±23.7%)* above the April 2017 SAAR of 593,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +14.3%. For longer-term perspectives, not-seasonally adjusted sales were 52.3% below the “housing bubble” peak but 22.4% above the long-term, pre-2000 average.

The median sales price of new houses sold in April 2018 was $312,400 (-$23,000 or 6.9% MoM); meanwhile, the average sales price shot up to $407,300 (+$41,300 or 11.3%). Starter homes (defined here as those priced below $200,000) comprised 14.1% of the total sold, up from the year-earlier 10.7%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 4.7% of those sold in April, up from 1.8% 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 April, single-unit completions fell by 34,000 units (-4.0%). Despite completions decreasing more than sales (-10,000 units; -1.5%), inventory for sale expanded in both absolute (+2,000 units) and months-of-inventory terms (+0.1 month). 

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Existing home sales fell by 140,000 units (-2.5%) in April, to a SAAR of 5.46 million units (5.600 million expected). Inventory of existing homes for sale expanded in absolute and months-of-inventory terms (+160,000 units; +0.5 month). Because new-home sales decreased by a smaller proportion than existing-home sales, the share of total sales comprised of new homes advanced to 10.8%. The median price of previously owned homes sold in April advanced to $257,900 (+$8,100 or 3.2% MoM). 

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Housing affordability degraded notably as the median price of existing homes for sale in March jumped by $9,500 (+3.9%; +5.9 YoY), to $252,100. 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 +0.8% (+6.5% YoY) -- marking a new all-time high for the index.

“The home price increases continue with the National Index rising at 6.5% per year,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Seattle continues to report the fastest rising prices at 13% per year, double the National Index pace. While Seattle has been the city with the largest gains for 19 months, the ranking among other cities varies. Las Vegas and San Francisco saw the second and third largest annual gains of 12.4% and 11.3%. A year ago, they ranked 10th and 16th. Any doubts that real, or inflation-adjusted, home prices are climbing rapidly are eliminated by considering Chicago; the city reported the lowest 12-month gain among all cities in the index of 2.8%, almost a percentage point ahead of the inflation rate.

“Looking across various national statistics on sales of new or existing homes, permits for new construction, and financing terms, two figures that stand out are rapidly rising home prices and low inventories of existing homes for sale. Months-of-supply, which combines inventory levels and sales, is currently at 3.8 months, lower than the levels of the 1990s, before the housing boom and bust. Until inventories increase faster than sales, or the economy slows significantly, home prices are likely to continue rising. Compared to the price gains of the last boom in the early 2000s, things are calmer today. Gains in the National Index peaked at 14.5% in September 2005, more quickly than Seattle is rising now.” 

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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.