April 2019 Residential Sales, Inventory and Prices

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Sales of new single-family houses in April 2019 were at a seasonally adjusted annual rate (SAAR) of 673,000 units (679,000 expected). This is 6.9% (±14.0%)* below the revised March rate of 723,000 (originally 692,000), but 7.0% (±12.4%)* above the April 2018 SAAR of 629,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +8.2%. For longer-term perspectives, not-seasonally adjusted sales were 51.5% below the “housing bubble” peak but 26.2% above the long-term, pre-2000 average.

The median sales price of new houses sold in April 2019 was $342,200 (+$36,400 or 11.9% MoM); meanwhile, the average sales price jumped to $393,700 (+$21,400 or 5.7%). Starter homes (defined here as those priced below $200,000) comprised 12.1% of the total sold, down from the year-earlier 13.1%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.0% of those sold in April, down from 3.3% 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 April, single-unit completions fell by 39,000 units (-4.1%). Although sales (-50,000 units; 6.9%) fell more dramatically than completions, inventory for sale contracted in absolute terms (-3,000 units) while months-of-inventory (+0.3 month) expanded. 

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Existing home sales retreated in April (-20,000 units), to a SAAR of 5.19 million units (5.36 million expected). Inventory of existing homes for sale expanded in both absolute (+160,000 units) and months-of-inventory terms (+0.4 month). The median price of previously owned homes sold in April jumped to $267,300 (+$7,600 or 2.9% MoM). Because the drop in new-home sales was proportionally larger than that of resales, the share of total sales comprised of new homes ticked down to 11.5%. 

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Housing affordability retreated as the median price of existing homes for sale in March jumped by $9,100 (+3,6%; +3.8 YoY), to $261,100. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices rose at a not-seasonally adjusted monthly change of +0.6% (+3.7% YoY) -- the slowest rate of annual appreciation since September 2012.

“Home price gains continue to slow,” said David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The patterns seen in the last year or more continue: year-over-year price gains in most cities are consistently shrinking. Double-digit annual gains have vanished. The largest annual gain was 8.2% in Las Vegas; one year ago, Seattle had a 13% gain. In this report, Seattle prices are up only 1.6%. The 20-City Composite dropped from 6.7% to 2.7% annual gains over the last year as well. The shift to smaller price increases is broad-based and not limited to one or two cities where large price increases collapsed. Other housing statistics tell a similar story. Existing single family home sales are flat. Since 2017, peak sales were in February 2018 at 5.1 million at annual rates; the weakest were 4.36 million in January 2019. The range was 650,000.

“Given the broader economic picture, housing should be doing better. Mortgage rates are at 4% for a 30-year fixed rate loan, unemployment is close to a 50-year low, low inflation and moderate increases in real incomes would be expected to support a strong housing market. Measures of household debt service do not reveal any problems and consumer sentiment surveys are upbeat. The difficulty facing housing may be too-high price increases. At the currently lower pace of home price increases, prices are rising almost twice as fast as inflation: in the last 12 months, the S&P Corelogic Case-Shiller National Index is up 3.7%, double the 1.9% inflation rate. Measured in real, inflation-adjusted terms, home prices today are rising at a 1.8% annual rate. This compares to a 1.2% real annual price increases in housing since 1975.” 

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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.