Average Sales Price is Rocking, Units Sold are Rolling

The Existing Home Sales market is being held back by  an inventory shortage. We have been seeing the level of units sold improve since the bottom of the existing home market during 2009. It took years for the average sales price to return to pre-recession levels. The number of units sold peaked during 2005 while the average sales price peaked during the Summer of 2006. Events such as Hurricanes Katrina, Rita and Wilma impacted the housing market literally and figuratively. The Ike Spike in gasoline prices and the damage created by Hurricane Ike also shocked the market.

There are a multiple number of ways to examine the housing data, The headline numbers tend to be the average sales price and the number of units sold. When those numbers are multiplied you receive the dollar volume for the month. You can examine the data from the rolling year units sold perspective. How many units have been sold during the past year? You can look at the current year sales data. How are we comparing to prior years at the same point of the sales season. How are we doing on inventory. You cannot sell invisible homes.This is the background for the discussion of this month's data. Remember that all real estate is local.

Record May Average Sale Price - Approaching $300,000. The pre-recession peak average sales price for the month of May was 279,9000 during May 2005. That value is now $294,600. The dip in average sales price made it difficult for people to sell their homes without taking a loss. This depressed the number of units for sale and the number of units sold - absent the distressed home market. The distressed market included those that were involved in bankruptcies and foreclosures. The average sales price data is rocking.

The Number of May Units Sold was close to the 2003 level. Remember that the peak units sold was during 2005. The pace of growth is slower than prior to the recession. This means a couple of things to me. The recovery should continue for an extended period of time. The average sales price should continue to grow at a moderate pace for an extended period of time. This slow and steady wins the race pace should be a stabilizing influence on the rest of the economy as furniture sales, electronics and appliance sales, and home building material  and garden sales grow. This should also mean an improvement in hiring in the retail market, the construction market, the manufacturing market, and other sectors of the job market that have not fully recovered from the recession.

The Rolling Year data is at 5.5 million units sold. This level of sales is comparable to where we were during May 2002. It is slightly slower than the 5.7 million units sold during May 2003. Notice that the growth in units sold maintained a similar pace as May 2002 during May 2003 - it accelerated during 2003 through 2005. The numbers. are rolling.

The Current Year Data is trending close to 2002 and 2003 - Better than 2015, 2016. Realtors always won't to improve upon their prior year's sales level. Realtors used to be able to "guarantee" that if you bought a home and held onto it for at least a year, and if you did not buy in the Spring and sell during the Winter, that you could sell your home for more money that you originally paid. That was not true during the "Real Estate Bust." Now that we have improving sales prices and an increasing number of homes sold Realtors may be able to project higher sales prices for their listings. Now that units sold and prices are increasing Buyers may have to act faster and pay more for the existing home inventory that is available. Improving sales markets means that more people will consider moving.

The only thing that is not Rocking is the Inventory Level. The data that has been available regarding the existing home market only goes back to December 1999. We are tracking better than we did during 2000. We do not have the inventory that we had during 2001 through 2016.Oversupply during 2007-2011 either depressed the sales prices or slowed their growth. The opposite is true right now - shortage in supply and steady demand is driving sales prices higher. The problem here is that we may be at "peak listings" right now. Most buyers want to move between the end of June and the Fourth of July Weekend. Some will try to move by the end of July or august in order to be in their new homes by the beginning of the school year. If we do not see inventory improve then we cannot expect sales to improve. If we do not see inventory improve now we may have a worsening inventory situation for the immediate future.

This was a strong existing home report, other than the inventory levels. The average sales price value is rocking. The number of units sold are rolling. Trends are higher for the current year sales pace and the rolling year sales pace.  The Realtors have the annualized rate of sales pegged at 5.62 million units. That seems overly optimistic based on the inventory levels. The biggest question is whether or not the inventory will drop below 1.60 million units this Christmas or if people will ask Santa for another existing home before the Holidays.

It's the economy.

The author was an existing home Realtor for 15 years.

 Reclaiming Common Sense