December 2018 Headline Existing Home Sales Decline And Remain In Contraction Year-Over-Year

The headline existing home sales declined with the authors saying "Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation". Our analysis shows home sales three-month rolling average is in contraction year-over-year and worsening.

Analyst Opinion of Existing Home Sales

The rolling averages have been slowing since the beginning of 2017. This month the rolling averages remained in contraction - and worsened. Housing inventory is historically low for Decembers. Despite the NAR's assertion that "After two consecutive months of increases, existing-home sales declined in the month of December" - even using their wacky methodology to determine the rate of growth - the rate of growth year-over-year has been in contraction and declining for the last 4 months.

Econintersect Analysis

  • Unadjusted sales rate of growth decelerated 7.2 % month-over-month, down 11.7 % year-over-year - sales growth rate trend declined using the 3-month moving average.
  • Unadjusted price rate of growth down 0.6 % month-over-month, up 1.6 % year-over-year - price growth rate trend again marginally slowed using the 3 months moving average.
  • The homes for sale unadjusted inventory declined this month compared to last month, and remains historically low for Novembers, but is up 4.2 % from inventory levels one year ago).

NAR reported:

  • Sales down 6.4 % month-over-month, down 10.3 % year-over-year
  • Prices up 2.9 % year-over-year - the rate of growth is slowing.
  • The market (from Econoday) expected annualized sales volumes of 5.200 M to 5.400 M (consensus 5.240 million) vs the 4.99 million reported.

(Click on image to enlarge)

The graph below presents unadjusted home sales volumes.

(Click on image to enlarge)

Here are the headline words from the NAR analysts:

Lawrence Yun, NAR's chief economist, says current housing numbers are partly a result of higher interest rates during much of 2018. "The housing market is obviously very sensitive to mortgage rates. Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring."

"Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation," says Yun. "But there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points."

"The partial shutdown of the federal government has not had a significant effect on December closings, but the uncertainty of a shutdown has the potential to harm the market," said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. "Once the government is fully reopened, I am hopeful that housing transactions will increase."

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