Sales are Improving - Inventory is dropping - Prices will Rise.
The National Association of Realtors released better than expected data for existing home sales for the month of November. The problem is that they are overestimating the potential for 2016. We saw a huge jump in sales compared to last November. The Average Sales Price hit a new record for the month of November. All of this should be good news. The rest of the media is proclaiming that this is the best data during the past decade. This is true. The problem is that the existing home sales market took a long time to reach the peak activity of 2005 and took 6 years to hit bottom during 2010. We are still in a recovery - we have not hit an expansion as of yet. When reading this analysis remember that all real estate is local and that this is a national snapshot
We saw 411,000 Units Sold - better than 2007-2015, Worse than 2002-2006. The rest of the world discusses the relative position of the market compared to the lows of the housing recession. Those who own homes 5may have purchased their homes prior to 2007. If you purchased a home prior to 2007 you may have been holding back to see the equity in your home restored.
We saw a record Average Sales Price Set for November. The peak average sales price was set for November during November 2006. The average sales price have risen for the past five years. They will continue to rise.
There are two ways to project the annual sale level - one looks back to the past twelve months rolling sales - the other looks at the current year data. We are at the eleventh month of the year so the trend is well established. We are trending between where we were during 2015 (5.256 million) and 2001 (5.333 million.) The realtors are being very optimistic that we are on track for 5.61 Million units. That is doubtful.
We have seen 5.45 Million units sold during the past 12 months - this trends us between where we were during 2002 and 2003. While it is possible that we could maintain this pace of sales and hit 5.61 million the growth rate, the slope of the graph, is not as steep as it was during 2003.This difference between the two graphs indicates that we are in a rising market. We saw a pace of 6.125 million units during November 2004 after a "hockey stick" year.
We have an inventory problem. We need to have inventory in order to sell existing homes. Our inventory is lower than it was during December 2001. Inventory tend to drop through December as people wait to place their homes on the market for the "Spring Market." People want to place their home on the market so that they can move over Memorial Day Weekend, the Fourth of July, or Labor Day Weekend. If we have a supply issue and demand increases prices will soar.
One last thought: The October units sold were reduced down from 446,000 units to 445,000 units while the average sales price increased from $274,3000 to $275,500. We may see some downward revisions to the November data - it still was a really good number. It was better than projected. We need to seen increase in full-time jobs in order to see an increase in new and existing home sales. We are in a downward trajectory for full-time jobs through January. Will workers have enough time on the job (2 years) in order to push the market higher? Anything is possible.
It's the economy.
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