June 2020 Residential Sales, Inventory and Prices

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Sales of new single-family houses in June 2020 were at a seasonally adjusted annual rate (SAAR) of 776,000 units (700,000 expected). This is 13.8% (±17.8%)* above the revised May rate of 682,000 (originally 676,000 units) and 6.9% (±13.7%)* above the June 2019 SAAR of 726,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was +12.1%. For longer-term perspectives, NSA sales were 44.1% below the “housing bubble” peak but 41.5% above the long-term, pre-2000 average.

The median sales price of new houses sold in June rose ($19,000 or +6.1% MoM) to $329,200; meanwhile, the average sales price increased to $384,700 ($22,400 or +6.2%). Starter homes (defined here as those priced below $200,000) comprised 8.1% of the total sold, down from the year-earlier 10.6%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 1.4% of those sold in June, almost unchanged from 1.5% 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 June, single-unit completions increased by 80,000 units (+9.6%). Since sales jumped by a larger margin (94,000 units; +13.8%), inventory for sale contracted in both absolute (-4,000 units) and months-of-inventory (-0.8 month) terms.

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Existing home sales soared by a record amount in June (810,000 units or +20.7%), to a SAAR of 4.72 million units (4.795 million expected). Inventory of existing homes for sale expanded in absolute terms (+20,000 units) but contracted in months-of-inventory terms (-0.8 month). Because resales rose by a wider margin than new-home sales, the share of total sales comprised of new homes slipped to 14.1%. The median price of previously owned homes sold in June rose to $295,300 ($11,700 or +4.1% MoM).

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Housing affordability deteriorated (-2.3 percentage points) even as the median price of existing homes for sale in May inched down by $1,000 (-0.3% MoM; +2.4 YoY), to $287,700. 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 +0.7% (+4.5% YoY).

“May's housing price data were 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 4.5% in May 2020, with comparable growth in the 10- and 20-City Composites (up 3.1% and 3.7%, respectively). In contrast with the past eight months, May's gains were less than April’s. Although prices increased in May, in other words, they did so at a decelerating rate. We observed an analogous development at the city level: prices increased in all 19 cities for which we have data, but accelerated in only 3 of them (in contrast with 12 cities last month and 18 the month before that).

“More data will obviously be required in order to know whether May’s report represents a reversal of the previous path of accelerating prices or merely a slight deviation from an otherwise intact trend. Even if prices continue to decelerate, that is quite different from an environment in which prices actually decline.

“Among the cities, Phoenix retains the top spot for the 12^th consecutive month, with a gain of 9.0% for May. Home prices in Seattle rose by 6.8%, followed by Tampa at 6.0%. As has been the case for the last several months, 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.