October Real Estate Looks Upbeat

No Matter What Grey Cloud Commentators Say


The "Great Recession" was a housing recession followed by a jobs recession, followed by a retail recession, followed by a revenue recession. Retail bounced back first. It took until January 2017 for all of the full-time jobs lost between July 2007 and January 2010 to be recovered and maintained. We had a "full-time jobs iceberg" that took nearly 9.5 years to "melt." Full-time jobs are necessary for mortgages. Mortgages are necessary, for most people, in order to purchase homes.  We hit multi-decade lows for new construction during 2010 and 2011. The new construction market has been improving since that time. New construction is necessary for new home sales to improve. Inventory of new homes has been growing during the past year. Existing home sales make up the vast majority of the monthly sales for real estate. All of these activities spur retail activities that help create new jobs. This article will examine the new construction data, the new home sales data, and the existing home sales data and project the possibilities for this month using same month growth data, month to moth growth data, current year growth data and rolling year growth data.  There isn't always a storm brewing when gray skies come on the scene. Sometimes it is just a "Fall Sky."


New Home Starts should surge through 80,000 units.  The month to month (MTM)  data indicates that we could see 76,000 to 91,000 single family homes started this past month, non-seasonally adjusted (all data referenced is non-seasonally adjusted unless otherwise noted.) The October to October (O2O) growth data indicates that we could see 69,000 to 83,000 starts this month.  We have already had 711,000 starts this year. If we grow at the same rate then we should see roughly 79,000 units, using the current year data is pegging us at 916,000 units, up from last month's 909,000. This means than we should be 7,000 units better than we were last October, or roughly 83,000 units.  The overlap of MTM and October to October falls between 76,000 and 83,000 units. Expect us to see between 79,000 units and 83,000 units with the possibility of something in the mid-80s to high 80s as starts ramp up for the "Spring Market."


Units under Construction should edge higher. Last month we had 1.148 million units started, much higher than October 2017 when we saw only 1.110 million units started. This number has been growing steadily for nearly a decade. This units under construction data is pretty much a "rolling year" data point combined with a "current year data point." The MTM growth indicates an upper level of 1.16 million units. The O2O data is indicating a number over 1.154 million units and up to 1.3 million units. We are no longer "spiking" units under construction, all though in the Toledo area there is a nice crop of houses being planted this Fall. Expect another number from 1.154 million to 1.163 million units under construction.


Completions have been picking up after the early spike in Starts. The MTM data indicates 99,000 to 112,000 completions. The O2O data indicates 112,000 to 123,000 units. Last year we only had 106,900.  The current year data has us at 892,000 units as of September. This places us at roughly 79,000 units this month. The Rolling Year (RY) data  places us at 1.218 million, up from 1.200 million last month.  This indicates that we should be 18,000 units higher than October of 2017, or roughly 125,000 units.  Remember that last year we were at 106,900 so a 112,000 level would be improvement. Also remember that between 1993 and 2007 we were "always" over 118,000 units during October. Expect a number over 112,000, approaching 123,000, and most likely around the 118,000 level.


Construction is not slowing, at least not "non-seasonally adjusted."

 Reclaiming Common Sense

New home sales should continue improving as inventory grows from 300,000 units. New home inventory is needed in order for new home sales to occur.Those who have lamented the lack of sales often ignore the lack of inventory. Last year we had fewer than 300,000 units for sale. We had more homes for sale during October 2001 through April 2009. Inventory has grown from 285,000 units during September 2017 to 331,000 units during September 2018. Last October we were at 289,000 units. It is projected that we should grow to 335,000 units, up 4,000 units from last month. The MTM data indicates a growth of 1% to 2%. The O2O data indicates growth of 14% to 19%. This gives us a range of 334,000 to 343,000 units for sale. Again, the current year data and the rolling year data are roughly the same thing.

Another uptick in monthly sales, October to October. The MTM data indicate sales of 40,000 to 54,000 units. We are not going to drop to 40,000 units. The O2O data indicates 52,000 to 57,000 units sold. Last year only 49,000 units were sold so anything in the 50,000 to 59,000 units level would be good news, and the highest in over a decade. This year we have seem 522,000 units sold. We are on-track to exceed the sales of 2016 and 2017. We may approach the level of sales seen during 1983. The CY data indicates 58,000 units could be sold. The rolling year data indicates that we should bump up from 630,000 last month to 633,000 units sold this month. We should sell at least 3,000 more units than last October. This places us at at least 52,000 units. The CY Trend is slowing so 58,000 units may be unrealistic. Expect a number around 52,000 to 56,000 units sold.

There have been months of price resistance and months of price breakthroughs this year.
The MTM data indicate a possible swing of 6%. The O2O data indicate a possible spike of 3% to 13%. CPI shelter inflation has been at, or above, 3%.  we could see a drop from last year's $394,000 to $386,000. The data overlaps between $397,000 and $405,000. Expect a new October record, and do not be surprised if it pulls back into the $380s.

New home sales should continue to grow as the inventory grows. Inventory should continue to grow as sales grow. We may be in a virtuous cycle for new home sales.

Existing Home Inventory may decrease month to month and improve October to October.  Inventory was gradually increasing from 1999 through 2005 before there was a massive spike during 2006 through 2008. It took until 2013 before inventory returned to "normal" levels. This column wrote an article during 2015 lamenting the historically low level of inventory during December of 2015. Similar articles would be written during December 2016 and December 2017. The same month data was on the decline since 2015. We have seen inventory improve during the past three months. The natural trend is for people to "take their home off the market" after school starts, during Thanksgiving, and during Christmas.The MTM data indicates a drop of 1% to 5% in inventory while the O2O data indicates a possible drop of 5% to 10%.  This data indicates an inventory level around 1.71 million to 1.78 million units. We have seen improving inventory data so the 1.80 million we had last year could be the floor. Inventory improved from 1.86 million during September 2017 to 1.875 million during September 2018. If we see the same, modest growth this October compared to last October then we could see 1.815 million units inventory. Down could be up.


Expect a drop in month to month and October to October units sold. There have been some who are concerned regarding the level of sales of existing homes. Right now, after September, we are trending better than 2015, slower than 2017, and comparable to 2016. Sales are expected to drop 1% to 8% MTM and could be flat or rise up to 6% October to October. We could see sales better than September of this year and slower than October of last year. This data indicates a range of 415,000 to 448,000. The middle is roughly 431,000. The Current Year (CY) data is at 4.112 million units. This means that we could see 456,000 units sold.  The rolling year (RY) data is trending lower and indicates a value of 445,000 units sold. We may be at an inflection point where, as inventory improves, sales may be improving.Having the CY data pointing higher than the RY data is a good sign. The value should be over 430,000 and should be over 440,000. We may see strength in the non-seasonally adjusted data, sales over 458,000, seasonally adjusted to the downside.


The monthly data indicates that we should see sales over 440,000 units. We saw sales over 500,000 units during 2003 through 2006. We were over 440,000 during October 2001 and 2002, and again October 2014, 2015, 2016 and 2017.l Expect at least 440,000 units sold, anticipate a 450,000 level, and do not be too surprised if we approach 460,000 units sold as people try to treat themselves to new homes before the holidays.


The Average Sales price is expected to drop month to month and improve year to year. Anticipate a drop of average sales price of 1% to 2% MTM and a spike of 3% to 9% October to October. The data indicates an average sales price of $296,000 to 314,000.The month to month and October to October data indicate almost the same price range. September to September the Average Sales price was only up just over 2.48%. If that happens this month then the sales price should come in around $294,750. The $300,000 level has been broached. It is not anticipated to happen during October.


Existing home sales spur jobs and retail sales. The data is indicating that improving inventory levels may help improve the units sold data. We should see an new October average sales price record set. The new home construction data will be released November 19th, followed by the Existing Home Sales data on November 21st, and then New Home Sales on November 26th, Expect good news to be recorded, non-seasonally adjusted. Do no be surprised if the seasonally adjusted data "disappoints" the gray sky crowd.


It's the economy.