September 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in September 2018 were at a seasonally adjusted annual rate (SAAR) of 553,000 units (625,000 expected). This is 5.5% (±12.1%)* below the revised August rate of 585,000 units (originally 629,000) and 13.2% (±13.6%)* below the September 2017 SAAR of 637,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -18.0%. For longer-term perspectives, not-seasonally adjusted sales were 60.2% below the “housing bubble” peak and 21.6% below the long-term, pre-2000 average.

The median sales price of new houses sold in September was $320,000 (+$800 or 0.3% MoM); meanwhile, the average sales price dropped to $377,200 (-$7,300 or 1.9%). Starter homes (defined here as those priced below $200,000) comprised 9.8% of the total sold, down from the year-earlier 12.0%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 2.4% of those sold in September, up from 2.0% 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 September, single-unit completions fell by 80,000 units (-8.7%). Although the drop in completions outpaced that of sales (-32,000 units; 5.5%), inventory for sale expanded in both absolute (+9,000 units) and months-of-inventory (+0.6 month) terms. 

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Existing home sales tumbled in September (-180,000 units), to a SAAR of 5.15 million units (5.300 million expected). Inventory of existing homes for sale shrank in absolute terms (-30,000 units) but expanded in months-of-inventory (+0.1 month) terms. Because new-home sales fell by a proportionally greater amount than resales, the share of total sales comprised of new homes fell to 9.7%. The median price of previously owned homes sold in September retreated to $258,100 (-$7,500 or 2.8% MoM). 

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Housing affordability marginally improved as the median price of existing homes for sale in August settled by $4,600 (-1.7%; +4.9 YoY), to $267,300. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices slowed to a not-seasonally adjusted monthly change of +0.2% (+5.8% YoY) -- but still marked a new all-time high for the index.

“Following reports that home sales are flat to down, price gains are beginning to moderate,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Comparing prices to their levels a year earlier, 14 of the 20 cities, the National Index plus the 10-city and 20-city Composite Indices all show slower price growth. The seasonally adjusted monthly data show that 10 cities experienced declining prices. Other housing data tell a similar story: prices and sales of new single family homes are weakening, housing starts are mixed and residential fixed investment is down in the last three quarters. Rising prices may be pricing some potential home buyers out of the market, especially when combined with mortgage rates approaching 5% for 30-year fixed rate loans.

“There are no signs that the current weakness will become a repeat of the crisis, however. In 2006, when home prices peaked and then tumbled, mortgage default rates bottomed out and started a three year surge. Today, the mortgage default rates reported by the S&P/Experian Consumer Credit Default Indices are stable. Without a collapse in housing finance like the one seen 12 years ago, a crash in home prices is unlikely.” 

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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.