May 2020 Residential Sales, Inventory and Prices

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Sales of new single-family houses in May 2020 were at a seasonally adjusted annual rate (SAAR) of 676,000 units (630,000 expected). This is 16.6% (±15.5%) above the revised April rate of 580,000 (originally 623,000 units) and 12.7% (±23.5%)* above the May 2019 SAAR of 600,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was +14.3%. For longer-term perspectives, NSA sales were 51.3% below the “housing bubble” peak but 22.4% above the long-term, pre-2000 average. May was only the second instance in which single-family sales exceeded starts; the previous occurrence was in February 2009.

The median sales price of new houses sold in May rose ($14,900 or +4.9% MoM) to $317,900; meanwhile, the average sales price increased to $368,800 ($16,500 or +4.7%). Starter homes (defined here as those priced below $200,000) comprised 15.6% of the total sold, up from the year-earlier 10.7%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.1% of those sold in May, down from 3.6% 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 decreased by 86,000 units (-9.8%). Since sales jumped (by 96,000 units; +16.6%), inventory for sale contracted in both absolute (-7,000 units) and months-of-inventory (-1.1 months) terms. 

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Existing home sales dropped in May (420,000 units or -9.7%), to a SAAR of 3.91 million units (4.29 million expected). Inventory of existing homes for sale expanded in both absolute (+90,000 units) and months-of-inventory terms (+0.8 month). Because new-home sales rose while resales fell, the share of total sales comprised of new homes jumped to 14.7%. The median price of previously owned homes sold in May slipped to $284,600 ($2,100 or -0.7% MoM). 

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Housing affordability improved (+9.6 percentage points) even as the median price of existing homes for sale in April rose by $6,100 (+2.2% MoM; +7.3 YoY), to $288,700. 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 +1.1% (+4.7% YoY).

“April’s housing price data continue to be remarkably stable,” said Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “The National Composite Index rose by 4.7% in April 2020, with comparable growth in the 10- and 20-City Composites (up 3.4% and 4.0%, respectively). In all three cases, April’s year-over-year gains were ahead of March’s, continuing a trend of gently accelerating home prices that began last fall. Results in April continued to be broad-based. Prices rose in each of the 19 cities for which we have reported data, and price increases accelerated in 12 cities.

“As was the case in March, we have data from only 19 cities this month, since transactions records for Wayne County, Michigan (in the Detroit metropolitan area) continue to be unavailable. This is, so far, the only directly visible impact of COVID-19 on the S&P CoreLogic Case-Shiller Indices. The price trend that was in place pre-pandemic seems so far to be undisturbed, at least at the national level. Indeed, prices in 12 of the 20 cities in our survey were at an all-time high in April.

“Among the cities, Phoenix retains the top spot for the 11th consecutive month, with a gain of 8.8% for April. Home prices in Seattle rose by 7.3%, followed by increases in Minneapolis (6.4%) and Cleveland (6.0%). Prices were particularly strong in the West and Southeast, and comparatively weak in the Northeast.” 

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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.