July 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in July 2018 were at a seasonally adjusted annual rate (SAAR) of 627,000 units (648,000 expected). This is 1.7% (±14.7%)* below the revised June rate of 638,000 (originally 666,000 units), but 12.8% (±15.7%)* above the July 2017 SAAR of 556,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +10.4%. For longer-term perspectives, not-seasonally adjusted sales were 54.9% below the “housing bubble” peak but 1.4% above the long-term, pre-2000 average.

The median sales price of new houses sold in July was $328,700 (+$18,700 or 6.0% MoM); meanwhile, the average sales price jumped to $394,300 (+$24,800 or 6.7%). Starter homes (defined here as those priced below $200,000) comprised 11.3% of the total sold, down 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 1.9% of those sold in July, little changed from 2.1% 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 July, single-unit completions fell by 45,000 units (-5.2%). Because the drop in sales (-11,000 units; 1.7%) was outpaced by that of completions, inventory for sale expanded in both absolute (+6,000 units) and months-of-inventory terms (+0.2 month). 

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Existing home sales fell by 40,000 units (-0.7%) in July, to a SAAR of 5.34 million units (5.425 million expected). Inventory of existing homes for sale shrank in absolute terms (-10,000 units) but months of inventory were unchanged at 4.3 months. 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 July retreated to $269,600 (-$4,200 or 1.5% MoM). 

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Housing affordability degraded further as the median price of existing homes for sale in June jumped by $11,500 (+4.3%; +5.2 YoY), to a record-high $279,300. 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% (+6.2% YoY) -- marking a new all-time high for the index.

“Home prices continue to rise across the U.S.” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “However, even as home prices keep climbing, we are seeing signs that growth is easing in the housing market. Sales of both new and existing homes are roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some markets. Rising mortgage rates -- 30-year fixed rate mortgages rose from 4% to 4.5% since January -- and the rise in home prices are affecting housing affordability.

“The West still leads the rise in home prices with Las Vegas displacing Seattle as the market with the fastest price increase. Population and employment growth often drive homes prices. Las Vegas is among the fastest growing U.S. cities based on both employment and population, with its unemployment rate dropping below the national average in the last year. The Northeast and Midwest are seeing smaller home price increases. Washington, Chicago and New York City showed the three slowest annual price gains among the 20 cities covered.” 

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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.