May 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in May 2018 were at a seasonally adjusted annual rate (SAAR) of 689,000 units (665,000 expected). This is 6.7% (±14.1%)* above the revised April rate of 646,000 (originally 662,000 units) and 14.1% (±19.9%)* above the May 2017 SAAR of 604,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +14.0%. For longer-term perspectives, not-seasonally adjusted sales were 50.4% below the “housing bubble” peak but 24.3% above the long-term, pre-2000 average.

The median sales price of new houses sold in May was $313,000 (-$5,500 or 1.7% MoM); meanwhile, the average sales price dropped to $368,500 (-$26,100 or 6.6%). Starter homes (defined here as those priced below $200,000) comprised 16.9% of the total sold, up from the year-earlier 14.0%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.1% of those sold in May, down from 3.5% 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 May, single-unit completions jumped by 88,000 units (+11.0%). Although completions outpaced sales (+43,000 units; 6.7%), inventory for sale expanded in absolute (+3,000 units) but contracted in months-of-inventory terms (-0.3 month). 

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Existing home sales fell by 20,000 units (-0.4%) in May, to a SAAR of 5.43 million units (5.520 million expected). Inventory of existing homes for sale expanded in absolute and months-of-inventory terms (+50,000 units; +0.1 month). Because new-home sales increased while existing-home sales declined, the share of total sales comprised of new homes advanced to 11.3%. The median price of previously owned homes sold in April rose to $264,800 (+$6,000 or 2.7% MoM). 

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Housing affordability degraded further as the median price of existing homes for sale in April jumped by $8,400 (+3.3%; +5.9 YoY), to $259,900. 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 +1.0% (+6.4% YoY) -- marking a new all-time high for the index.

“Home prices continued their climb with the S&P CoreLogic Case-Shiller National Index up 6.4% in the past 12 months,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Cities west of the Rocky Mountains continue to lead price increases with Seattle, Las Vegas and San Francisco ranking 1-2-3 based on price movements in the trailing 12 months. The favorable economy and moderate mortgage rates both support recent gains in housing. One factor pushing prices up is the continued low supply of homes for sale. The months-supply is currently 4.3 months, up from levels below 4 months earlier in the year, but still low.

“Looking back to the peak of the boom in 2006, 10 of the 20 cities tracked by the indices are higher than their peaks; the other ten are below their high points. The National Index is also above its previous all-time high, the 20-city index slightly up versus its peak, and the 10-city is a bit below. However, if one adjusts the price movements for inflation since 2006, a very different picture emerges. Only three cities -- Dallas, Denver and Seattle -- are ahead in real, or inflation-adjusted, terms. The National Index is 14% below its boom-time peak and Las Vegas, the city with the longest road to a new high, is 47% below its peak when inflation is factored in.” 

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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.