Reclaiming Common Sense

Wednesday's January New Construction Data was Stronger than Reported

The Existing Home Sales Spiked January to January by 11.6%

The housing industry is an economic stimulant. More new construction leads to more new home sales, more construction jobs, more retail jobs, more professional services jobs, and even more existing home sales. New home buyers are often existing home sellers. January tends to mean fewer starts, units under construction, completions, and sales compared to December, and more activity than last January.  Down can be up. It is also going to be important to watch the "seasonally adjusted annualized" start, units, completions, and sales.

Existing Home Sales are the bulk of the real estate market.  We saw the January 2019 Existing Home Sales (EHS) data drop below 300,000 units. The January to January data was expected to bounce just as the  New Home Construction data bounced January to January.

Existing Home Sales were expected to drop month to month and bump higher, in general, January to January. The January sales level tends to drop 24% to 30% month to month during January. This meant that we could have expected January Sales between 303,000 to 331,000 units. The January to January data could have dropped by 3% (unlikely) or spiked by 6%. This would mean that we could see sales of 303,000 to 329,000 by this standard. Both projections were in agreement.

Existing Home Sales jumped 11.6% January to January to 318,000 total units. There were 285,000 single family units sold and 33,000 condominiums sold.  This was a 26.7% month to month decline in current month solds, right in the middle of the expected 24% to 30% drop.

We were almost most certain to set a January Record Average Sales Price this January. The average sales price (ASP) for January has been steadily rising since January 2013. The month to month data was pointing towards an average sales price between $298,000 and 317,000. The January to January data was pointing between $291,000 and 298,000. Expect an ASP under $298,000 and over $288,000.

The Average Sales Price set a record at $302,700. The average sale price for single family homes came in at $303,700 while condominiums came in at $294,600. Both were January records.

Inventory, the lack thereof, has been holding back existing home sales for five years.  The January to January level is expected to drop up to 6% or grow by up to 5%.  It was  expected to see the existing home inventory level of 1.425M to 1.450 million. It was even possible that we could see up to  1.500 million units.

Inventory rose by 2.38% to 1.418 million units. This is still lower than the 1.592 million units during January 2019, and lower than the January record low of 1.520 million of 2018. The data only is available back to 1999.

Inventory normally rises, in percentage terms, January through May. It is possible to see inventory rise during June or July. June is normally the best closing month of the year as people try to close on the final Friday of the month and move homes around the Independence Day weekend.

Basically, the news is good.

All real estate is local. New home sales prices are based upon the State, County, City, School District, Neighborhood, size of the home, upgrades, and motivation of the buyer and the seller. The same could be said for existing home sales. All of the data discussed in this article is non-seasonally adjusted data, except the SAAR data. Contact a REALTOR to find out what is happening in the existing home market. Some REALTORS specialize in the new home market. Do your homework. Some homes are "over-priced" when they hit the market, some are under-priced (for a quick sale,) and some are priced "just right. The inventory shortage could lead to bidding wars. Know how much you can afford before you buy.

We received strong New Construction Data this week. The New Home Starts data spiked January to January by 21.4% from 87,000 units during January 2019 to 109,100 this January. Units under Construction increased 3.7% from January 2018 to 1.1782 million units. Completions rose 1.7% from 87,200 last January to 88,700 this January. All of this activity bodes well for New Home sales this year. The new home construction data was discussed in "Jan. New Construction: Green Shoots."

Seasonally adjusted sales (SAAR) dropped December to January. This happens "every" January. Sales jumped 9.6% SAAR January to January  and 11.6% January to January (Non-Seasonally Adjusted.) This does not happen every January. More popping is expected.

It's the Economy.

Copyright ©2020 “Existing-Home Sales Drop 1.3% in January
But sales are up from one year ago” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted with permission. February 21, 2020