August 2016 Residential Sales, Inventory and Prices

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Sales of new single-family houses in August 2016 were at a seasonally adjusted annual rate (SAAR) of 609,000 -- slightly above expectations of 598,000. This is 7.6 percent (±10.7%)* below the revised July rate of 659,000, but 20.6 percent (±14.8%) above the August 2015 SAAR of 505,000; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +22.0%. For a longer-term perspective, August sales were 56% below the “bubble” peak and 4.4% below the long-term, pre-2000 average.

The median sales price of new houses sold in August 2016 fell by $9,100 to $284,000; the average sales price was $353,600 (+$1,600). Starter homes (those priced below $200,000) made up 18.0% of the total sold in August, the lowest proportion on record for that calendar month (going back to 2002); prior to the Great Recession starter homes comprised as much as 61% of total sales. Interestingly, however, homes prices below $150,000 made up 6% of those sold in August, an increase of nearly one-fifth compared to August 2015’s record low (for that calendar month) of 4.9%.

* 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 August, single-unit completions declined by 2,000 units (-0.3%). Because completions decreased more gradually than sales, new-home inventory expanded in both absolute (+4,000 units) and months of inventory (+0.4 month) terms. 

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Existing home sales fell by 50,000 units (-3.2%) in August to 5.33 million units (SAAR), well below expectations of 5.54 million. Inventory of existing homes shrank in both absolute (-70,000 units) and months-of-inventory (-0.1 month) terms. Because both new- and existing-home sales decreased by the same amount (-50,000 units), the share of total sales comprised of new homes retreated to 10.3% -- remaining above 10% for the second month after a nearly eight-year hiatus. The median price of previously owned homes sold in August fell by $3,100 (-1.3%), to $240,200. 

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Housing affordability marginally improved as the median price of existing homes for sale in July fell by $3,800 (-1.5%; but +5.4 YoY), to $246,000. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P CoreLogic Case-Shiller Home Price indices posted a not-seasonally adjusted monthly change of +0.7% (+5.1% YoY).

“Both the housing sector and the economy continue to expand with home prices continuing to rise at about a 5% annual rate,” says David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The statement issued last week by the Fed after its policy meeting confirms the central bank’s view that the economy will see further gains. Most analysts now expect the Fed to raise interest rates in December. After such Fed action, mortgage rates would still be at historically low levels and would not be a major negative for house prices,

“The S&P CoreLogic Case-Shiller National Index is within 0.6% of the record high set in July 2006. Seven of the 20 cities have already set new record highs. The 10-year, 20-year, and National indices have been rising at about 5% per year over the last 24 months. Eight of the cities are seeing prices up 6% or more in the last year. Given that the overall inflation is a bit below 2%, the pace is probably not sustainable over the long term. The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt. Currently, outstanding mortgage debt on one-to-four family homes is 12.6% below the peak seen in the first quarter of 2008 and up less than 2% in the last four quarters. There is no reason to fear that another massive collapse is around the corner.” 

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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.