December 2018 Residential Sales, Inventory and Prices

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Sales of new single-family houses in December 2018 have not yet been reported because of the federal government’s partial shutdown. Existing home sales retreated in December (-340,000 units), tumbling to a SAAR of 4.99 million units (5.240 million expected). Inventory of existing homes for sale shrank in both absolute (-190,000 units) and months-of-inventory (-0.2 month) terms. The median price of previously owned homes sold in December fell to $253,600 (-$3,700 or 1.4% MoM).

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Housing affordability worsened again as the median price of existing homes for sale in November rose by $2,800 (+1.1%; +5.0 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 edged up at a not-seasonally adjusted monthly change of +0.1% (+5.2% YoY).

“Home prices are still rising, but more slowly than in recent months,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The pace of price increases are being dampened by declining sales of existing homes and weaker affordability. Sales peaked in November 2017 and drifted down through 2018. Affordability reflects higher prices and increased mortgage rates through much of last year. Following a shift in Fed policy in December, mortgage rates backed off to about 4.45% from 4.95%.

“Housing market conditions are mixed while analysts’ comments express concerns that housing is weakening and could affect the broader economy. Current low inventories of homes for sale -- about a four-month supply -- are supporting home prices. New home construction trends, like sales of existing homes, peaked in late 2017 and are flat to down since then. Stable 2% inflation, continued employment growth, and rising wages are all favorable. Measures of consumer debt and debt service do not suggest any immediate problems.” 

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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.