October 2021 Residential Sales, Inventory and Prices

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Sales of new single-family houses in October 2021 were at a seasonally adjusted annual rate (SAAR) of 745,000 units (790,000 expected). This is 0.4% (±21.1%)* above the revised September rate of 742,000 (originally 800,000 units), but 23.1% (±15.1%) below the October 2020 SAAR of 969,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was -24.4%. For longer-term perspectives, NSA sales were 46.4% below the “housing bubble” peak but 12.9% above the long-term, pre-2000 average.

The median sales price of new houses sold in October rose by $3,000 (+0.7%) to a record-high $407,700; meanwhile, the average sales price jumped to $477,800 ($20,600 or +4.5% MoM), also a new record. Starter homes (defined here as those priced below $200,000) comprised 2.4% of the total sold, down from the year-earlier 5.6%; 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 1.7% of sales, up from the year-earlier 0.5%.

* 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 October, single-unit completions declined by 16,000 units (-1.7%). Although sales nudged higher (3,000 units; +0.4%), inventory for sale rose in both absolute (11,000 units) and months-of-inventory (+0.2 month) terms. 

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Existing home sales rose in October (50,000 units or +0.8%), to a SAAR of 6.34 million units (6.20 million expected). Inventory of existing homes for sale contracted in absolute terms (-10,000 units) but was unchanged in months-of-inventory terms. Because resales rose at a faster pace than new-home sales, the share of total sales comprised of new homes declined to 10.5%. The median price of previously owned homes sold in October advanced to $353,900 ($2,700 or +0.8% MoM).

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Housing affordability was unchanged despite the median price of existing homes for sale in September dropping by $5,000 (-1.4% MoM; +13.8 YoY), to $359,700. 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 +1.0% (+19.5% YoY).

“If I had to choose only one word to describe September 2021’s housing price data, the word would be ‘deceleration,’” said Craig Lazzara, Managing Director at S&P DJI. “Housing prices continued to show remarkable strength in September, though the pace of price increases declined slightly. The National Composite Index rose 19.5% from year-ago levels, with the 10- and 20-City Composites up 17.8% and 19.1%, respectively. This month, however, the rate of price growth began to decline, as each of our three composites rose less in September than in August.

“We also saw very strong price growth at the city level. All 20 cities saw price increases in September, and all 20 cities stand at their all-time highs. September’s price increase ranked in the top quintile of historical experience for all 20 cities, and in the top decile for 17 of them. That said, in 14 of 20 cities, prices decelerated -- i.e., increased by less in September than in August.

“Phoenix’s 33.1% increase led all cities for the 28^th consecutive month. Tampa (+27.7%) rose to second place in September, and Miami (+25.2%) edged out Dallas, San Diego, and Las Vegas for the bronze medal. Prices were strongest in the South (+24.3%) and the Sunbelt (+24.2%), but every region logged double-digit gains.

“We have previously suggested that the strength in the U.S. housing market is being driven by households’ reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. More data will be required to understand whether this demand surge represents simply an acceleration of purchases that would have occurred over the next several years, or reflects a secular change in locational preferences. September’s report is consistent with either explanation.”

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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.