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Tuesday, August 31, 2021

July 2021 Residential Sales, Inventory and Prices

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Sales of new single-family houses in July 2021 were at a seasonally adjusted annual rate (SAAR) of 708,000 units (700,000 expected). This is 1.0 percent (±11.3 percent)* above the revised June rate of 701,000 (originally 676,000 units), but 27.2 percent (±7.3 percent) below the July 2020 SAAR of 972,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was -25.9%. For longer-term perspectives, NSA sales were 49.0% below the “housing bubble” peak but 20.5% above the long-term, pre-2000 average.

The median sales price of new houses sold in July jumped ($20,300 or +5.5% MoM) to a record-high $390,500; meanwhile, the average sales price also rose to a record $446,000 ($16,400 or +3.8% MoM). Starter homes (defined here as those priced below $200,000) comprised 2.2% of the total sold, down from the year-earlier 8.2%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 were less than 0.6% of sales, down from 1.2% 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 July, single-unit completions rose by 33,000 units (+3.6%). Because sales increased by a smaller amount (7,000 units; +1.0%), inventory for sale rose in absolute (+19,000 units) and months-of-inventory (+0.2 month) terms. 

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Existing home sales advanced in July (120,000 units or +2.0%), to a SAAR of 5.99 million units (5.830 million expected). Inventory of existing homes for sale expanded in absolute (90,000 units) and months-of-inventory (0.1 month) terms. Because resales rose more quickly than new-home sales, the share of total sales comprised of new homes edged down to 10.6%. The median price of previously owned homes sold in July retreated to $359,900 ($2,900 or -0.8% MoM).

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Housing affordability dipped by 6.0 percentage points as the median price of existing homes for sale in June jumped by $13,800 (+3.9% MoM; +24.4 YoY), to a record $370,600. 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 +2.2% (+18.6% YoY).

“June 2021 is the third consecutive month in which the growth rate of housing prices set a record, said Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The National Composite Index marked its thirteenth consecutive month of accelerating prices with an 18.6% gain from year-ago levels, up from 16.8% in May and 14.8% in April. This acceleration is also reflected in the 10- and 20-City Composites (up 18.5% and 19.1%, respectively). The last several months have been extraordinary not only in the level of price gains, but in the consistency of gains across the country. In June, all 20 cities rose, and all 20 gained more in the 12 months ended in June than they had gained in the 12 months ended in May. Home prices in 19 of our 20 cities (all but Chicago) now stand at all-time highs, as do the National Composite and both the 10- and 20-City indices.

“June’s 18.6% price gain for the National Composite is the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data. This month, Boston joined Charlotte, Cleveland, Dallas, Denver, and Seattle in recording their all-time highest 12-month gains. Price gains in all 20 cities were in the top quartile of historical performance; in 19 cities, price gains were in top decile.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. June’s data are consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question.

“Phoenix’s 29.3% increase led all cities for the 25th consecutive month, with San Diego (+27.1%) and Seattle (+25.0%) close behind. As has been the case for the last several months, prices were strongest in the Southwest (+22.7%) and West (+22.6%), but every region logged top-decile, double-digit gains.”

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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.

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