June 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in June 2018 were at a seasonally adjusted annual rate (SAAR) of 631,000 units (669,000 expected). This is 5.3% (±17.1%)* below the revised May rate of 666,000 (originally 689,000 units), but 2.4% (±24.0%)* above the June 2017 SAAR of 616,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +1.8%. For longer-term perspectives, not-seasonally adjusted sales were 54.6% below the “housing bubble” peak but 9.0% above the long-term, pre-2000 average.

The median sales price of new houses sold in June was $302,100 (-$7,600 or 2.5% MoM); meanwhile, the average sales price retreated to $363,300 (-$1,800 or 0.5%). Starter homes (defined here as those priced below $200,000) comprised 15.8% of the total sold, up from the year-earlier 12.5%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.5% of those sold in June, little changed from 3.6% 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 June, single-unit completions fell by 20,000 units (-2.3%). Although the drop in sales (-35,000 units; 5.3%) outpaced that of completions, inventory for sale expanded in both absolute (+4,000 units) and months-of-inventory terms (+0.4 month). 

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Existing home sales fell by 30,000 units (-0.6%) in June, to a SAAR of 5.38 million units (5.450 million expected). Inventory of existing homes for sale also expanded in absolute and months-of-inventory terms (+80,000 units; +0.2 month). Although new-home sales decreased more slowly than existing-home sales, the share of total sales comprised of new homes ticked down to 10.5%. The median price of previously owned homes sold in June rose to a new record-high $276,900 (+$11,800 or 2.7% MoM). 

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Housing affordability degraded further as the median price of existing homes for sale in May jumped by $7,700 (+3.0%; +5.2 YoY), to $267,500. 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 +1.1% (+6.4% YoY) -- marking a new all-time high for the index.

“Home prices continue to rack up gains two to three times greater than the inflation rate,” said David Blitzer, Managing Director & Chairman of the Index Committee at S&P Dow Jones Indices. “The YoY increases in the S&P CoreLogic Case-Shiller National Index have topped 5% every month since August 2016. Unlike the boom-bust period surrounding the financial crisis, price gains are consistent across the 20 cities tracked in the release; currently, the range of the largest to smallest price change is 10 percentage points (PP) compared to a 20PP range since 2001, and a 25PP range between 2006 and 2009. Not only are prices rising consistently, they are doing so across the country.

“Continuing price increases appear to be affecting other housing statistics. Sales of existing single family homes -- the market covered by the S&P CoreLogic Case-Shiller Indices -- peaked last November and have declined for three months in a row. The number of pending home sales is drifting lower as is the number of existing homes for sale. Sales of new homes are also down and housing starts are flattening. Affordability -- a measure based on income, mortgage rates and home prices -- has gotten consistently worse over the last 18 months. All these indicators suggest that the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.” 

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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.