Existing Home Sales and New Home Sales are Economic Activity Multipliers
Last week we received the new construction data for March. The new home starts, new homes under construction, and the new home completions were all up over last year's March values and this past February's data, non-seasonally adjusted. This column projected that the Friday before last in the March Real Estate Forecast article. That same article projected the existing home sales could exceed last March's level of 455,000 units sold. It also saw a possibility of only 429,000 units sold due to a constrained inventory level. We have been experiencing record low inventory for over a year. We should have seen a rise in the inventory level from the February Level. he question was whether or not that level would be greater than the March 2017 level. The inventory level hit an "All-Time" low during December 2016 when inventory hit 1.65 million homes. The existing home data only is available back to January 1999. That December 2016 record low inventory was shattered during December of 2017 when the inventory dropped to another "all-time low" of 1.48 million units. What was recorded this month?
We set a Record High March Average Sales Prices. The forecast article projected an average sales price range of $287,000 to $298,000. The Average Sales Price hit $290,100. This is up considerably from the pre-recession level of $265,400.
The Units Sold were up from February 2018 and down from March 2017. The number of units sold were up from the 319,000 units sold during February and down from the 455,000 units sold during March 2017. This sounds like a mixed bag. Remember that we were selling under 400,000 units during March 2008 through March 2014, March only, non-seasonally adjusted. Last year's pop was "Solid" and unloved.
We set a Record Low March Inventory Level. The 2018 March Existing Home Inventory was 18 million last March. last March that was comparable to what we had for inventory during March 2000. This year we had 1.67 million units. This would have been an "all-time low" inventory if we didn't have "all-time" lows during December 2017 and all-time same month lows during January 2018, and February 2018. An ambitious Realtor would cold call for listings.
Rolling Year Sales and Current Year Sales Are Slightly Lower than Last March. The rolling year graph shows that we may have "plateaued" at 5.5 million units. If the current Year sales are lower than the current year sales for March 2017 then it is possible that the end of year sales will be lower than the end of 2017. If the Rolling Year sales are lower than March 2017 then the end of the year data could be lower than 2017. This data will have to be monitored closely. The "Great Recession" was, in part, caused by an over supply of inventory and an "undersupply" of buyers. Homes lingered. Prices dropped. People could not "afford" to sell their homes due to "negative equity."
This is a national snapshot of what was happening during the month of March. All real estate is local. You style of home, or condominium, your neighborhood, condominium association, school district, and community all matter. Contact a local Realtor for information on recent sales in your community. Potential home sellers may be holding off on selling because they cannot find a home to purchase. It is a "Catch-22" is sellers can't find something to buy because sellers aren't selling until they can find something to buy. Contact your Realtor or Attorney to see if a "Contingent" to buy contract is an option for you. Contingent home purchases for the sale of a home have been in use for decades. Contingent to buy a home have been used, it is just much more rare to use than a Contingent to sell agreement. The un its sold were good, not great. The average sales price was strong, once again.
Existing home sales are economic multipliers. If more homes are sold, more lenders are need, more movers are need, more Realtors are need, more appraisers are needed. Retail sales get a boost when more furniture is bought and more garden supplies are purchased. More retail sales mean, generally, more employees are needed. More jobs means more spending. It is a virtuous cycle.
It's the economy.
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