February 2019 Residential Sales, Inventory and Prices

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Sales of new single-family houses in February 2019 were at a seasonally adjusted annual rate (SAAR) of 667,000 units (620,000 expected). This is 4.9% (±14.4%)* above the revised January rate of 636,000 (originally 607,000) and 0.6% (±13.1%)* above the February 2018 SAAR of 663,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +3.7%. For longer-term perspectives, not-seasonally adjusted sales were 52.0% below the “housing bubble” peak but 7.1% above the long-term, pre-2000 average.

The median sales price of new houses sold in February was $315,300 (+$11,400 or 3.8% MoM); meanwhile, the average sales price jumped to $379,600 (+$21,600 or 6.0%). Starter homes (defined here as those priced below $200,000) comprised 12.5% of the total sold, up from the year-earlier 11.1%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.6% of those sold in February, little changed from 3.7% 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 February, single-unit completions fell by 91,000 units (-10.0%). Because completions fell while sales rose (+31,000 units; 4.9%), inventory for sale contracted in both absolute (-2,000 units) and months-of-inventory (-0.4 month) terms. 

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Existing home sales advanced in February (+580,000 units), jumping to a SAAR of 5.51 million units (5.080 million expected). Inventory of existing homes for sale expanded in absolute terms (+40,000 units) but contracted in months-of-inventory terms (-0.4 month). The median price of previously owned homes sold in December fell to $249,500 (-$7,200 or 2.8% MoM). Because the rise in resales was proportionally larger than that of new-home sales, the share of total sales comprised of new homes declined to 10.8%. 

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Housing affordability jumped as the median price of existing homes for sale in January fell by $7,000 (-2.7%; +3.1 YoY), to $249,400. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices dropped at a not-seasonally adjusted monthly change of -0.2% (+4.3% YoY).

“Home price gains continue to shrink,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “In the year to January, the S&P CoreLogic Case-Shiller National Index rose 4.3%, two percentage points slower than its pace in January 2018. The last time it advanced this slowly was April 2015. In 16 of the 20 cities tracked, price gains were smaller in January 2019 than in January 2018. Only Phoenix saw any appreciable acceleration. Some cities where prices surged in 2017-2018 now face much smaller increases: in Seattle, annual price gains dropped from 12.8% to 4.1% from January 2018 to January 2019. San Francisco saw annual price increases shrink from 10.2% to 1.8% over the same time period.

“Mortgage rates are as important as prices for many home buyers. Mortgage rates climbed from 3.95% in January 2018 to a peak of 4.95% in November 2018. Since then, rates have dropped to 4.28% as of mid-March. Sales of existing single-family homes slid gently downward from 4Q2017 until January of this year before jumping higher in February 2019. Home sales annual rate dropped from 5 million units in February 2018 to 4.36 million units in January 2019 before popping to 4.94 in February. It remains to be seen if recent low mortgage rates and smaller price gains can sustain improved home sales.” 

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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.