September 2020 Residential Sales, Inventory and Prices

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Sales of new single-family houses in September 2020 were at a seasonally adjusted annual rate of (SAAR) 959,000 units (1.016 million expected). This is 3.5 percent (±19.9 percent)* below the revised August rate of 994,000 (originally 1.011 million units), but 32.1 percent (±28.8 percent) above the September 2019 SAAR of 726,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was +33.9%. For longer-term perspectives, NSA sales were 31.0% below the “housing bubble” peak but 43.5% above the long-term, pre-2000 average.

The median sales price of new houses sold in September rose ($4,400 or +1.4% MoM) to $326,800; meanwhile, the average sales price jumped to a new record of $405,400 ($22,700 or +5.9% MoM). Starter homes (defined here as those priced below $200,000) comprised 6.7% of the total sold, down 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 1.3% of those sold in September, down from 1.8% 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 September, single-unit completions increased by 19,000 units (+2.1%). Since completions rose while sales fell (35,000 units; -3.5%), inventory for sale expanded in both absolute (+2,000 units) and months-of-inventory (+0.2 month) terms.

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Existing home sales extended gains in September (560,000 units or +9.4%), to a SAAR of 6.54 million units (6.2 million expected). Inventory of existing homes for sale contracted in both absolute (-20,000 units) and months-of-inventory terms (-0.3 month). Because resales rose while new-home sales fell, the share of total sales comprised of new homes dropped to 12.8%. The median price of previously owned homes sold in September rose to a new record $311,800 ($1,400 or +0.5 MoM).

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Housing affordability deteriorated (-0.9 percentage point) as the median price of existing homes for sale in August rose by $5,500 (+1.8% MoM; +11.7 YoY), to a new high of $315,000. 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% (+5.7% YoY).

“Housing prices were strong in August,” said Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “The National Composite Index gained 5.7% relative to its level a year ago, well ahead of July’s 4.8% increase. The 10- and 20-City Composites (up 4.7% and 5.2%, respectively) also rose at an accelerating pace in August. The strength of the housing market was consistent nationally – all 19 cities for which we have August data rose, and all 19 gained more in the 12 months ended in August than they had done in the 12 months ended in July.

“A trend of accelerating increases in the National Composite Index began in August 2019 but was interrupted in May and June, as COVID-related restrictions produced modestly-decelerating price gains. We speculated last month that the accelerating trend might have resumed, and August’s results easily bear that interpretation. The last time that the National Composite matched August’s 5.7% growth rate was 25 months ago, in July 2018. If future reports continue in this vein, we may soon be able to conclude that the COVID-related deceleration is behind us.

“Phoenix’s 9.9% increase topped the league table for August; this is the 15th consecutive month in which Phoenix home prices rose more than those of any other city. Seattle (8.5%) once again took the silver medal, with San Diego (7.6%) in third place. It’s a measure of housing’s strength that even the worst-performing cities, Chicago (1.2%) and New York (2.8%), did better in August than in July. Prices were strongest in the West and Southeast regions, and comparatively weak in the Midwest and 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.