February 2023 Residential Sales, Inventory and Prices

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Sales of new single-family houses in February 2023 were at a seasonally adjusted annual rate (SAAR) of 640,000 units (645,000 expected). This is 1.1% (±15.3%)* above the revised January rate of 633,000 (originally 670,000 units) but 19.0% (±12.9%) below the February 2022 SAAR of 790,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was -16.9%. For longer-term perspectives, NSA sales were 53.9% below the “housing bubble” peak and 12.9% above the long-term, pre-2000 average.

The median sales price of new houses sold in February 2023 was $438,200 (+2.7%, or $11,700). The average sales price was $498,700 (+3.9%, or $18,900). Homes priced at/above $750,000 comprised 10.2% of sales, down from the year-earlier 11.3%.

* 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 February, single-unit completions climbed by 10,000 units (+1.0%). Sales also rose (7,000 units), resulting in inventory for sale shrinking in both absolute (-3,000 units) and months-of-inventory (-0.1 month) terms. 

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Existing home sales broke off their 12-month decline when jumping in February (+14.5% or 580,000 units) to a SAAR of 4.58 million units (4.17 million expected). Inventory of existing homes for sale was unchanged in absolute terms but shrank in months-of-inventory terms (-0.3 month). Because resales advanced more dramatically than new-home sales, the share of total sales comprised of new homes decreased to 12.3%. The median price of previously owned homes sold in February rose to $363,000 (+0.5% or $1,800).

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Housing affordability bumped higher (+3.5 index points) as the median price of existing homes for sale in January fell by $8,000 (-2.4% MoM; +0.7 YoY) to $363,100. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices declined at a not-seasonally adjusted monthly change of -0.5% (+3.8% YoY).

“2023 began as 2022 had ended, with U.S. home prices falling for the seventh consecutive month,” says Craig J. Lazzara, Managing Director at S&P DJI. “The National Composite declined by 0.5% in January, and now stands 5.1% below its peak in June 2022. On a trailing 12-month basis, the National Composite is only 3.8% ahead of its level in January 2022, a result also reflected in our 10- and 20-City Composites (both +2.5% year-over-year).

“January’s market weakness was broadly based. Before seasonal adjustment, 19 cities registered a decline; the seasonally adjusted picture is a bit brighter, with only 15 cities declining. With or without seasonal adjustment, most cities’ January declines were less severe than their December counterparts.

“Miami (+13.8% year-over-year) was the best performing city in January, extending its winning streak to six consecutive months. Tampa (+10.5%) and Atlanta (+8.4%) continued in second and third place, with Charlotte (+8.1%) not far behind. At the other end of the scale, one of the most interesting aspects of January’s report is the continued weakness in home prices on the West Coast, as San Diego and Portland joined San Francisco and Seattle in negative year-over-year territory. It’s therefore unsurprising that the Southeast (+10.2%) continues as the country’s strongest region, while the West (-1.5%) continues as the weakest.

“Financial news this month has been dominated by ructions in the commercial banking industry, as some institutions’ risk management functions proved unequal to the rising level of interest rates. Despite this, the Federal Reserve remains focused on its inflation-reduction targets, which suggest that rates may remain elevated in the near-term. Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months.”

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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.