October 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in October 2018 were at a seasonally adjusted annual rate (SAAR) of 544,000 units (575,000 expected). This is 8.9% (±13.7%)* below the revised September rate of 597,000 units (originally 553,000) and 12.0% (±13.1%)* below the October 2017 SAAR of 618,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -14.3%. For longer-term perspectives, not-seasonally adjusted sales were 60.8% below the “housing bubble” peak and 19.7% below the long-term, pre-2000 average.

The median sales price of new houses sold in October was $309,700 (-$11,600 or 3.6% MoM); meanwhile, the average sales price jumped to $395,000 (+$16,000 or 4.2%). Starter homes (defined here as those priced below $200,000) comprised 11.9% of the total sold, down from the year-earlier 12.2%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 4.8% of those sold in October, up from 4.1% 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 October, single-unit completions fell by 10,000 units (-1.2%). Because the drop in completions was outpaced by that of sales (-53,000 units; 8.9%), inventory for sale expanded in both absolute (+14,000 units) and months-of-inventory (+0.9 month) terms. 

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Existing home sales ambled higher in October (+70,000 units), to a SAAR of 5.22 million units (5.200 million expected). Inventory of existing homes for sale shrank in both absolute (-30,000 units) and 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 tumbled to 9.4%. The median price of previously owned homes sold in October retreated to $255,400 (-$1,500 or 0.6% MoM). 

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Housing affordability marginally improved as the median price of existing homes for sale in September dropped by $7,700 (-2.9%; +4.6 YoY), to $260,500. 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 +0.1% (+5.5% YoY) -- but still marked a new all-time high for the index.

“Home prices plus data on house sales and construction confirm the slowdown in housing,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The S&P CoreLogic Case-Shiller National Index showed a 5.5% YoY gain, weaker for the second month in a row as 16 of 20 cities showed smaller annual price gains. On a monthly basis, nine cities saw prices decline in September compared to August. In Seattle, where prices were rising at double-digit annual rates a few months ago, prices dropped last month. The few places reporting larger gains including some of the cities which had the biggest gains and largest losses 10 years ago: Las Vegas, Phoenix and Tampa.

“Sales of both new and existing single family homes peaked one year ago in November 2017. Sales of existing homes are down 9.3% from that peak. Housing starts are down 8.7% from November of last year. The National Association of Home Builders sentiment index dropped seven points to 60, its lowest level in two years. One factor contributing to the weaker housing market is the recent increase in mortgage rates. Currently the national average for a 30-year fixed rate loan is 4.9%, a full percentage point higher than a year ago.” 

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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.