October 2017 Headline Existing Home Growth Improves

The headline existing home sales growth improved with the authors saying "While the housing market gained a little more momentum last month, sales are still below year ago levels because low inventory is limiting choices for prospective buyers and keeping price growth elevated.". Our analysis of the unadjusted data agrees with the headline data.

Analyst Opinion of Existing Home Sales

The rolling averages have been slowing in 2017 - but they marginally accelerated this month. Still the rolling averages remain in contraction.

Econintersect Analysis

• Unadjusted sales rate of growth accelerated 7.9 % month-over-month, up 2.9 % year-over-year - sales growth rate trend accelerated using the 3 month moving average but remains in contraction.
• Unadjusted price rate of growth accelerated 0.2 % month-over-month, up 4.6 % year-over-year - price growth rate trend marginally decelerated using the 3 month moving average.
• The homes for sale inventory marginally declined this month, remains historically low for Octobers, and is down 10.4 % from inventory levels one year ago).

NAR reported:

• Sales up 2.0 % month-over-month, down 0.9 % year-over-year.
• Prices up 5.5 % year-over-year
• The market expected annualized sales volumes of 5.320 M to 5.550 M (consensus 5.425 million) vs the 5.48 million reported.

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The graph below presents unadjusted home sales volumes.

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Here are the headline words from the NAR analysts:

Lawrence Yun, NAR chief economist, says sales activity in October picked up for the second straight month, with increases in all four major regions. "Job growth in most of the country continues to carry on at a robust level and is starting to slowly push up wages, which is in turn giving households added assurance that now is a good time to buy a home," he said. "While the housing market gained a little more momentum last month, sales are still below year ago levels because low inventory is limiting choices for prospective buyers and keeping price growth elevated."

Added Yun, "The residual effects on sales from Hurricanes Harvey and Irma are still seen in parts of Texas and Florida. However, sales should completely bounce back to their pre-storm levels by the end of the year, as demand for buying in these areas was very strong before the storms."

"Listings — especially those in the affordable price range — continue to go under contract typically a week faster than a year ago, and even quicker in many areas where healthy job markets are driving sustained demand for buying," said Yun. "With the seasonal decline in inventory beginning to occur in most markets, prospective buyers will likely continue to see competitive conditions through the winter."

NAR President Elizabeth Mendenhall says the pending tax reform legislation in both the House and Senate is a direct attack on homeowners and homeownership, with the result being a tax increase on millions of middle-class homeowners in both large and small communities throughout the U.S.

"Making changes to the mortgage interest deduction, eliminating or capping the deduction for state and local taxes and modifying the rules on capital gains exemptions poses serious harm to millions of homeowners and future buyers," said Mendenhall. "With first-time buyers struggling to reach the market, Congress should not be creating disincentives to buy and sell a home. Furthermore, adding $1.5 trillion to the national debt will raise future borrowing costs for our children and grandchildren."

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To remove the seasonality in home prices, here is a year-over-year graph which demonstrates a general improvement in home price rate of growth since mid-2012.

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Econintersect does a more complete analysis of home prices with the Case-Shiller analysis.

The home price situation according to the NAR:

The median existing-home price for all housing types in October was $247,000, up 5.5 percent from October 2016 ($234,100). October's price increase marks the 68th straight month of year-over-year gains.

According to the NAR;

First-time buyers were 32 percent of sales in October, which is up from 29 percent in September but down from 33 percent a year ago. NAR's 2017 Profile of Home Buyers and Sellers — released last month4— revealed that the annual share of first-time buyers was 34 percent.

All-cash sales were 20 percent of transactions in October, unchanged from September and down from 22 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in October, down from 15 percent last month and unchanged from a year ago.

Unadjusted Inventories are below the levels of one year ago.

Total housing inventory at the end of October decreased 3.2 percent to 1.80 million existing homes available for sale, and is now 10.4 percent lower than a year ago (2.01 million) and has fallen year-over-year for 29 consecutive months. Unsold inventory is at a 3.9-month supply at the current sales pace, which is down from 4.4 months a year ago.

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Caveats on Use of NAR Existing Home Sales Data

The National Association of Realtors (NAR) is a trade organization. Their analysis tends to understate the bad, and overstate the good. However, the raw (and unadjusted) data is released which allows a complete unbiased analysis. Econintersect analyzes using the raw data. Also note the National Association of Realtors (NAR) new methodology now has moderate back revision to the data - so it is best to look at trends, and not get too excited about each month's release.

Econintersect determines the month-over-month change by subtracting the current month's year-over-year change from the previous month's year-over-year change. This is the best of the bad options available to determine month-over-month trends - as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).