May 2019 Residential Sales, Inventory and Prices

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Sales of new single-family houses in May 2019 were at a seasonally adjusted annual rate (SAAR) of 626,000 units (680,000 expected). This is 7.8% (±14.7%)* below the revised April rate of 679,000 (originally 673,000) and 3.7% (±15.0%)* below the May 2018 SAAR of 650,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was -3.2%. For longer-term perspectives, not-seasonally adjusted sales were 54.9% below the “housing bubble” peak but 14.8% above the long-term, pre-2000 average.

The median sales price of new houses sold in May 2019 was $308,000 (-$27,100 or 8.1% MoM); meanwhile, the average sales price fell to $377,200 (-$9,300 or 2.4%). Starter homes (defined here as those priced below $200,000) comprised 11.7% of the total sold, down from the year-earlier 16.1%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.3% of those sold in May, up fractionally from 3.2% 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 May, single-unit completions fell by 47,000 units (-5.0%). Because sales (-53,000 units; 7.8%) fell more dramatically than completions, inventory for sale expanded in both absolute (+1,000 units) and months-of-inventory (+0.3 month) terms. 

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Existing home sales advanced in May (+130,000 units), to a SAAR of 5.34 million units (5.29 million expected). Inventory of existing homes for sale expanded in both absolute (+90,000 units) and months-of-inventory terms (+0.1 month). The median price of previously owned homes sold in May jumped to $277,700 (+$10,800 or 4.0% MoM). Because new-home sales fell while resales rose, the share of total sales comprised of new homes ticked down to 10.5%. 

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Housing affordability was nearly unchanged (-0.3 percentage point) although the median price of existing homes for sale in April rose by $7,800 (+3.0%; +3.7 YoY), to $269,300. 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 +0.9% (+3.5% YoY) -- the slowest rate of annual appreciation since September 2012.

“Home price gains continued in a trend of broad-based moderation,” said Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices. “Year-over-year price gains remain positive in most cities, though at diminishing rates of change. Seattle is a notable exception, where the YOY change has decreased from 13.1% in April 2018 to 0.0% in April 2019.

“The national average 30-year fixed mortgage rate rose from below 4% in late 2017 to briefly reaching almost 5% by the latter part of 2018. Peak YOY changes in the 20-City Composite coincided with the upward turn in mortgage rates during the first quarter of 2018. In 2019, mortgage rates reversed course again and the 30-year fixed mortgage rate is again under 4%, yet the YOY house price moderation that coincided with the 2018 uptick in rates has not changed course. Other industry statistics are consistent with this observation. For example, the national supply of housing is trending upward and suggesting weaker demand. Perhaps the trend for the moment is toward normalization around the real long run average annual price increase. Comparing the YOY National Index nominal change of 3.5% to April’s inflation rate of 2.0% yields a real house price change of 1.5% -- edging closer to the real long run average of 1.2% cited by David Blitzer last month.” 

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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.