February Inventory Shortage - Average Sales Price Spike
There are a number of key indicators that can move the market: The Employment Situation (Jobs) Report, the new home sales data, the existing home sales data, and the retail (MARTS) sales report. New and existing home sales impact retail sales. Without full-time jobs, housing languishes. If housing languishes then home furniture, electronics, appliance, and home and garden sales struggle. This column has written a number of articles regarding the part-time recovery in which we find ourselves. We have only 391,000 more full-time jobs now than we had during July 2007. People need two years of work experience, normally with the same employer, normally full-time employment, to qualify for a mortgage. The MARTS report for February should year over year declines for the month of February in six retail sectors, including the electronics and appliances sector. The new home construction data was better than what we have seen during the past eight year - the problem is that was at a slower pace for starts than we saw between 1991 and 2008.
The Existing home sales data for January was solid, yet disconcerting. We saw a record high average sales price for the month of January. We also saw improvement in the number of units sold. That said, the February units sold were fewer than February 2002 through February 2007. The final numbers for 2016 revealed that we sold existing homes at a pace of 5.242 million units. This was a slower pace than 2002 and faster than 2001. The December Existing Home Sales data were flat. Units were off 1,000 units from December 2015 while the average sales price was slightly higher. The good news is that the number of units sold during February is higher than January, the average sales price is higher than January, and that we have seen year over year increases in the average sales price and the units sold during the month of February the past two Februaries. What happened?
The Average Sales Price decreased slightly from January 2017 Advance Level. The accompanying graph shows that we either hit the low sales price for the year during either January or February of any given year where the economy is improving. The Average Sales Price (ASP) was reported at $271,000 last month. That ASP was revised down to $269,500. This means that this month's $270.100 value was a decrease from the advance number and an increase from the preliminary number. Next month we will receive the "final' ASP for January.
Existing Homes saw a jump of average sales price from last year's $253,9000 to $270,100. The existing home data only is available back to 1999. This is the highest February ASP ever. This is a very mixed message.
Existing Home Sales saw 315,000 units sold - up from last year's 314,000 units, just barely. This is important to note because this is still a lower pace of sales than what we saw during February 2002, 2003, 2004, 2005, 2006, and 2007. The sales prices could have jumped up to 280,000 or higher based on recent January to February jumps in prices. This may be a clear example of supply and demand. As prices increase, demand can decrease.
We have a record low February Level of Inventory - And almost an "all-time" low for existing home inventory. We have been hovering at roughly 1.9 million units in inventory during the past four years. The all-time low was 1.710 million units during December of 1999. We set a "record low" of 1.65 million units during December of 2016 and a record January low of 1.68 million last month. Units sold will not improve much until the inventory level improves. A healthier level of inventory would be over 2.5 million units The official number is that we have 3.8 months of inventory available. The absorption last year was roughly 1.5 million between March, April, and May. We may have even less than 3.5 months of inventory.
The January revisions were all revisions downward from the advance values. The average sales price was reduced. The median sales price was reduced. The number of months of inventory was reduced. The overall inventory level was reduced. Now may be a great time to sell your home if you are thinking about doing so. Remember that all real estate is local and that this column deals with the national picture. Your market changes by community, school district, and neighborhood or condominium building. Contact a Realtor for the a Comparative Market Analysis (or Current Market Analysis)(CMA.)
It's the economy.
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