January 2019 Residential Sales, Inventory and Prices

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Sales of new single-family houses in January 2019 were at a seasonally adjusted annual rate (SAAR) of 607,000 units (620,000 expected). This is 6.9% (±16.3%)* below the revised December rate of 652,000 units (originally 621,000) and 4.1% (±14.0%)* below the January 2018 SAAR of 633,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -6.3%. For longer-term perspectives, not-seasonally adjusted sales were 56.3% below the “housing bubble” peak and 13.9% below the long-term, pre-2000 average.

The median sales price of new houses sold in January was $317,200 (-$1,900 or 0.6% MoM); meanwhile, the average sales price edged down $900 (-0.2%) to $373,100. Starter homes (defined here as those priced below $200,000) comprised 8.9% of the total sold, down from the year-earlier 16.7%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 2.2% of those sold in January, down 4.2% YoY.

* 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 January, single-unit completions jumped by 212,000 units (+30.2%). New inventory for sale contracted in absolute (-5,000 units) but expanded in months-of-sales (+0.3 month) terms as completions rose while sales fell (-45,000 units; 6.9%). 

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Existing home sales retreated in January (-60,000 units or 1.2%), to a SAAR of 4.94 million units (5.050 million expected). Inventory of existing homes for sale expanded in both absolute (+60,000 units) and months-of-inventory (+0.2 month) terms. Because the retreat in new-home sales was proportionally greater than that of resales, the share of total sales comprised of new homes fell to 10.9%. The median price of previously owned homes sold in January fell to $247,500 (-$7,200 or 2.8% MoM). 

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Housing affordability improved marginally as the median price of existing homes for sale in December fell by $3,500 (-1.3%; +3.4 YoY), to $256,400. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices edged down at a not-seasonally adjusted monthly change of -0.1% (+4.7% YoY).

“The annual rate of price increases continues to fall,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Even at the reduced pace of 4.7% per year, home prices continue to outpace wage gains of 3.5% to 4% and inflation of about 2%. A decline in interest rates in the fourth quarter was not enough to offset the impact of rising prices on home sales. The monthly number of existing single family homes sold dropped throughout 2018, reaching an annual rate of 4.45 million in December. The 2018 full year sales pace was 4.74 million.

“Regional patterns continue to shift. Seattle and Portland, OR experienced the fastest price increases of any city from late 2016 to the spring of 2018; in December, they ranked 11th and 16th. Currently, the cities with the fastest price increases are Las Vegas and Phoenix. These are a reminder of how prices rose and collapsed in the financial crisis 12 years ago. Despite their recent gains, Las Vegas and Phoenix are the furthest below their 2006 peaks of any city followed in the S&P CoreLogic Case-Shiller Indices. 

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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.