After separating new development data from existing sales from our 1Q14 Manhattan sales report, the high end new development product that is beginning to close now and pushing overall prices to record levels.
NAR released their Existing Home Sales Report on Thursday with a headline that read: February Existing-Home Sales Remain Subdued that blamed the severe winter weather and low inventory for lower sales.
Of course inventory has been near historic lows for a few years so that’s not a new reason. I’m left with the weather and as someone who hates to use the weather as a crutch, it seems to be a pragmatic – it’s difficult to show or be in the mood to view properties when it is zero degrees outside. The weather explanation was also used in the prior report but those contracts were signed in December for the January report, before the “polar vortex.”
I see the recent fretting about the cooling of housing as an indication of how improving conditions were based largely on Fed policy and not fundamentals. The combination of rising mortgage rates and declines from the year ago release of pent-up demand post-”fiscal cliff” likely gets price gains and sales levels in sync with fundamental economic conditions.
I’ve charted NAR EHS stats from the past 4 years without seasonal adjustments. Price gains have been insane so the combination of slowing sales and rising inventory will take the froth out of the market and hopefully get us on a more sustainable path.
After slipping in June, NAR’s Existing Home Sales for July jumped 6.5% unexpectedly from the prior month. Last month the results showed an slight decline (and were adjusted downward for this release) and the thinking was that the market is starting to cool off with the introduction of rising rates to the market in May. The bulk of May contracts probably closed in July, the likely basis of this most recent release. However it looks like the market continued to see a rise in demand in June, following the May bump in rates as people looked to get in the market before rates rose further.
Still, this month over month stuff is pretty ridiculous to place a lot of faith in. The year over year surge of 20.7% (non-seasonally adjusted) and 17.2% jump (seasonally adjusted) is much more telling of the long term market change.
Here are a few other charts to review. Inventory is much lower than a year ago while showing some gains in excess of seasonal trends. Median sales price growth is off the hook. 13.7% YoY growth is not sustainable with flat income, tight credit and high unemployment and underemployment. Thanks goodness for rising rates.
Well, NAR released the August 2012 existing home sale numbers today. Yawn.
More importantly, it’s International Talk Like A Pirate Day and I’ve marked this day on my calendar for nearly as long as the 10-year run it’s had. Just mentioning the annual event to my kids makes them worry about me and yet be embarrassed for me at the the same time.
And yes, home sales are up. [Pirate talk translator]
August Existing-Home Sales and Prices Rise [NAR]
On Talk Like A Pirate Day Jonathan Miller Tells It Like It Is [Curbed DC]
International Talk Like a Pirate Day [Wikipedia]
International Talk Like A Pirate Day [Original Site]
Google’s Pirate Themed Home Page [Google]
NAR’s Existing Home Sales numbers continue to edge higher. In this chart I annualize the non-seasonally adjusted and seasonally adjusted results. Think there isn’t seasonality in housing sales?
Here’s a good summary by Peter Coy at Bloomberg Businessweek.
No doubt a big reason was the improvement in affordability. The interest rate on a 30-year fixed-rate mortgage has continued falling since the period covered by the NAR report, portending better times ahead. Freddie Mac (FMCC), the mortgage-buying giant, says the rate was 3.79 percent in the week ended May 17, the lowest since it began keeping records in 1971. The Realtors’s index of affordability hit a record high in the January-March quarter. It factors in sales prices of existing homes, mortgage rates, and household income, which is slowly strengthening as the labor market improves.
And here’s a trend on inventory and absorption (months supply). Inventory continues to slide (not seasonally adjusted).
The recurring theme across the US is an increase in the number of sales and sales prices. NAR’s existing home sale report saw a record pace in the number of sales. West Virginia drew top honors with the largest gain in sales activity over the past year.
In addition to volume, housing prices have been rising nationwide. Condos seem to be leading the way in Massachusetts [Note: Subscription].
Around the country housing prices and exist-home sales are setting records or near record levels but the rate of appreciation seems to be easing across the country.