New Home Completion and New Home Sales Have been the Story of 2019
Existing Home Sales are rebounding
There are three main real estate reports that deserve attention: New Home Construction, New Home Sales, and Existing Home Sales. The largest portion of the real estate market is existing home sales. The sales of existing homes and new homes spur the jobs market and the retail sales market. Last week we received exceptionally strong new constructions data. The majority of new home buyers, and people building new construction homes, are existing home home sellers. The problem is that buyers cannot buy what is not for sale.
The persistent shortage of existing home inventory is holding back existing home sales. Inventory normally bottoms during December and Rises through the Summer. People want to get their homes on the market after the Super Bowl so that they can sell their home before Memorial Day and Close between the end of June and the beginning of September (Fourth of July weekend through Labor Day Weekend.)
Existing Home Sales have experienced year over year declines in inventory since 2014. Inventory fell to 1.79 million units during December of 2015 was a canary in the coalmine moment. The predecessor to this website, "Reclaiming Common Sense," started raising concerns at that time. Subsequently we have set December record lows for inventory set during December 2016 (1.650 million units,) and December 2017 (1.460 Million units.) Last year we saw improvement as inventory during December rose to 1.527 million units.
Inventory was expected to drop below 1.527 million units and possible set a new low under 1.40 million units. Inventory "collapsed" to 1.395 million units. Inventory falls during December as people who need to sell their homes have closings and people who "aren't in a hurry" let their listing contracts expire for the Christmas Holiday. They spiff up the home, get a new Realtor and a new Multiple Listing Service Number (MLS,) and maybe even a new price. According to the Realtor report we now only have a 3.0 month supply of inventory.
Units sold are expected to rebound from last year's 377,000 units during December of 2018. Existing home sales were also impacted by the Government Shutdown. Existing home sales could be expected to rise 1% to 5% month to month, giving us 408,000 to 424,000 units sold. This would be comparable to December 2017. The December to December data can rise double digits month to month, as it did during December 2014. We could challenge the 427,000 units sold during December 2017. We could even test the 437,000 sold during December 2016. It was thought that this level of sales could draw down inventory even more than projected. We saw a combined 434,000 single family homes and condominiums sold this month. This is comparable to 2016 (437,000) and 2015 (438,000.)
Another record December Average Sales Price Record was expected - over $300,000. Last month the average sales price was $308,000. It was possible for a 1% swing in either direction, yielding a range of $304,000 to $311,000. The December to December change is expected to be 3% to 4% from last December's $293,000 to between $302,000 and $305,000. Either way a new record December Average Sales Price was expected. The average Sales price rose to $311,200, up 0.97% month to month and up 5.92% December to December.
The Current Year and Rolling Year sales data rose by 0.04% last year. We had been experiencing year over year declines in sales since 2018. Current Year sales went negative January 2018. Rolling year, or trailing year sales, dropped negative during May of 2018. The worst it got was January 2019 when sales were down 8.95% and April 2019 when the rolling year sales were down 4.24%.
We may be entering a Real Estate Renaissance right now. The real estate market is contingent on people having the income to buy homes. We were in a full-time jobs recession from August 2007 through January 2017. We hit bottom during January 2010. We saw a record level of bankruptcies and foreclosures during the current era during the Great Recession of 2009. It takes 7 years for someone to be approved for an mortgage after going through bankruptcy or foreclosure. It also normally takes two years of consistent employment, full-time employment, in order to qualify for a mortgage. This means that the absolute earliest that his revival could have been expected was during 2017 or 2018. The December record level of workers and wages means that people may feel confident to place their home on the market and buy another home this Spring and Summer.
Home sales tend to drop in real terms from December to January and rise through June or July. This is why the Seasonally Adjusted Annualized Sales number tends to rise January through June. This year we peaked in August, until we peaked again during December.
Existing home sales can spur retail spending and hiring. The economy is improving. We have a record level of December Full-time Jobs. Full-time Jobs have been rising for years. We finally eclipsed the July 2007 level of full-time jobs during February 2017. It normally takes two years of consistent employment to qualify for a mortgage. We are seeing prosperity in all metropolitan areas for the first time since 1992, according to an article in Bloomberg. This data is for 2018. This past year was better than 2018 for jobs, wages, and unemployment. This could be the beginning of an expansion that we have not see in over a decade. The period between 2007 and 2017 was a recovery, not an expansion. We are not back to sales levels seen during 2000 or 2001. We are lagging behind 2015 and 2016. Inventory matters. Retail sales are at a record high. This confidence may spill over to the housing market.
This was a strong report, in relative terms. The rolling year data has been rolling higher month to month since June. June was a rough month for existing home sales. We are not even close to the heady sales levels of 2005 and 2006, and that is a good thing. Next month should see units sold drop month to month and spike January to January. Inventory should start to build. Average Sales prices should continue rising.
Remember that all real estate is local. Home prices depend upon your state, county, city, school district, neighborhood or condominium, size and condition of your home or condominium. It is no longer just "location, location, location." Contact a local REALTOR to find out what your home may be worth and what homes there are for you to buy. Also remember that two moves, in general, is easier and less stressful than carrying two mortgages.
It's the Economy.
Copyright ©2020 “Existing-Home Sales Climb 3.6% in December” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted with permission. January 22, 2020, https://www.nar.realtor/newsroom/existing-home-sales-climb-3-6-in-december
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