Reclaiming Common Sense

Existing Home Sales May Be Improving Again

The October Existing Home Sales data was given a lukewarm reception by the media. "Why aren't we seeing sales comparable to the 2004, 2005, 2006 levels?" This column produced a real estate forecast article for October in which it was projected that we would see:

  • Inventory should have dropped from the September level and risen from the October 2017 Level. 1.815 Million Total Units
  • Units sold sold drop September to October and October to October. Expectations were 415,000 to 448,000 units.
  • The Average Sales Price was "set" to go higher than last year, setting a record October Sales price. The data indicated something in the 410s, while logic and experience indicated a number between $286,000 and $299,000

The reason why we are not seeing sales comparable to the "pre-Housing Recession Era" is that we do not have the inventory that we had during pre-recession times. What was recorded and what was reported in the Realtors October Existing Home Sales report?

Inventory went down and up. The combined condominium and single family home inventory dropped from September's 1.881 million units to 1.848 million units. This is okay. This is what happens during the Fall and Winter. The good news is that this level is higher than the 1.800 million units we had during October 2017. Last year was the first year that total inventory was under 2 million units. Inventory was 2.470 million units during October 2004 and 2.900 million units during October 2005. This level is still low, it is improving year to year. We haven't been able to say that during the past decade. Inventory peaked during 2007.

Existing Home sales came in at the high end of expectations. There was s light drop from the 458,000 units sold during October 2017. This year we had comparable sales to October 2016 and better sales than October 2007 through 2015. It was anticipated that we would sell under 450,000 units, so 448,000 units sold was solid.

We saw a record average sales price set for October. This is good news, as well. It is very possible that we were seeing stagnation in the average sales price and in the units sold because we were seeing depreciation in the average sales price. It became a self-fulfilling prophesy. People could not qualify for mortgages because they did not have permanent full-time jobs. Full-time jobs have been rising substantially since 2010, and we have more full-time jobs now than we have ever had during the month of October. There is a psychological limit in existing home prices every $25,000, especially  the $50,000 interval, and even more so at the $100,000 increment. The average sales price came in under $300,000 as anticipated, up from $287,600 last October to $294,200 this October.

Rolling Year sales have temporarily peaked. We saw a peak during June of 2006 when it hit 4.633 million units. We saw a peak during October 2013 when we were at 5.097 million units. Even though the rolling year data is lower than it was during October 2017 we  are doing better than we were between October 2007 and October 2016. We have seen 5.411 million units sold during the past 12 months.

Current Year sales are at 4.559 million units. We are on track to sell between 5.256 million units (2016) and 5.452 million units (2016.) We are hanging to the high side of this range. 5.35 million units or more is possible. If we feel that the CY data is closer to the 5.45 million units then the current year data is greater than the rolling year data, and therefore the housing market may be starting an expansion mode, once again. If we feel that the CY data is trending closer to 5.40 million homes then we are still slowing a little bit. The "seasonally adjusted data" indicates that the authors of the report feel that we are in a slowing market with the "annualized rate" for the next year at only 5.220 million. We could see a spurt in sales during November and December as people try to close on a home before the end of the year. We most likely won't exceed the 2017 value.

This data was about as good as could be expected for having painfully low inventory. Low inventory can spur multiple offers and higher prices. High mortgage rate may spur some people who were waiting for interest rates to "bottom out" to jump into the "game." All real estate is local. Prices very by state, county, municipality, school district, neighborhood or condominium, or style of home. Some markets may be oversupplied while others may be critically low. If you are thinking of buying or selling a home it is recommended that you contact a local Realtor. Inventory should bottom during December and start climbing during January. Now is the time to get your house ready for sale and to get your pre-approvals initiated.

It's the economy.