August 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in August 2018 were at a seasonally adjusted annual rate (SAAR) of 629,000 units (630,000 expected). This is 3.5% (±13.7%)* above the revised July rate of 608,000 (originally 627,000 units) and 12.7% (±20.7%)* above the August 2017 SAAR of 558,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +11.1%. For longer-term perspectives, not-seasonally adjusted sales were 54.7% below the “housing bubble” peak and 4.4% below the long-term, pre-2000 average.

The median sales price of new houses sold in August was $320,200 (-$7,900 or 2.4% MoM); meanwhile, the average sales price slipped to $388,400 (-$600 or 0.2%). Starter homes (defined here as those priced below $200,000) comprised 12.0% of the total sold, down from the year-earlier 15.6%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 2.0% of those sold in August, down from 4.4% 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 August, single-unit completions rose by 96,000 units (+11.6%). Because the sales increase (+21,000 units; 3.5%) was outpaced by that of completions, inventory for sale expanded in absolute (+5,000 units) terms while months of inventory shrank (-0.1 month). 

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Existing home sales were unchanged in August, at a SAAR of 5.34 million units (5.360 million expected). Inventory of existing homes for sale was stable in both absolute and months-of-inventory terms. Because new-home sales rose while resales were unchanged, the share of total sales comprised of new homes bumped up to 10.5%. The median price of previously owned homes sold in August retreated to $264,800 (-$4,500 or 1.7% MoM). 

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Housing affordability marginally improved as the median price of existing homes for sale in July settled by $4,200 (-1.5%; +4.6 YoY), to $272,300. 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 +0.4% (+6.0% YoY) -- marking a new all-time high for the index.

“Rising homes prices are beginning to catch up with housing,” says David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Year-over-year gains and monthly seasonally adjusted increases both slowed in July for the S&P Corelogic Case-Shiller National Index and the 10 and 20-City Composite indices. The slowing is widespread: 15 of 20 cities saw smaller monthly increases in July 2018 than in July 2017. Sales of existing single family homes have dropped each month for the last six months and are now at the level of July 2016. Housing starts rose in August due to strong gains in multifamily construction. The index of housing affordability has worsened substantially since the start of the year.

“Since home prices bottomed in 2012, 12 of the 20 cities tracked by the S&P Corelogic Case-Shiller indices have reached new highs before adjusting for inflation. The eight that remain underwater include the four cities which led the home price boom: Las Vegas, Miami, Phoenix and Tampa. All are enjoying rising prices, especially Las Vegas which currently has the largest year-over-year increases of all 20 cities. The other cities where prices are still not over their earlier peaks are Washington DC, Chicago, New York and Detroit. “ 

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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.