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October 20, 2016 | Existing Home Sales Surge 3.2%, Median Price Declines 2.4%

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Existing home sales jumped 3.2% to 5.47 million at a seasonally adjusted annualized rate vs. the Bloomberg Econoday consensus of 5.35 million SAAR.

However, the report was not entirely glowing. Median prices declined 2.4% and August was revised lower by 0.6%.

existing-home-sales-2016-10a

Highlights

Existing home sales surged 3.2 percent in September to a 5.470 million annualized rate that exceeds Econoday’s high estimate. The key single-family component leads the report, up 4.1 percent to a 4.860 million rate while condos, where choices are limited and permits for new building are on the rise, fell 3.2 percent to a 610,000 rate.

Home owners have been reluctant to put their homes on the market though supply did rise in the month to 2.040 million from 2.010 million. But supply on a monthly basis, given the rise in sales, fell to 4.5 months from 4.6 months.

Prices have not been firm which helps explain both the lack of supply and also the rise in sales. The median fell 2.4 percent in the month to $234,200 though year-on-year appreciation remains on trend at plus 5.6 percent.

Other important details include a record low for distressed sales, at 4 percent of all transactions, and a solid 34 percent showing for first-time buyers which points to rising traffic and likely reflects the rising cost of rentals.

Regionally, September sales were strongest in the West, up 5.0 percent for a year-on-year gain of 1.6 percent, and in the Midwest, up 3.9 percent on the month for a year-on-year plus 2.3 percent. Total year-on-year resales are up but only fractionally, at plus 0.6 percent.

The new home market has been accelerating strongly and may now be lifting the resale market. Though price appreciation is no better than the 5 percent area, housing is in fact a leading strength for the consumer.

For starters, the new home market has not been accelerating strongly. I posted charts just yesterday.

Private Single-Family Housing Starts 1960 – 2016

housing-starts-2016-10b

Private Single-Family Housing Starts 1960 – 2016 Percent Change

housing-starts-2016-10c

For more details, please see Housing Starts Plunge 9 Percent, Permits Up 6.3 Percent: Deceptively Solid Report?

  • First, and as noted above, the new home market has not been accelerating strongly.
  • Secondly, new home buyer traffic is not strong.
  • Third, Econoday failed to mention the negative revision in August from -0.9% to -1.5%.
  • Fourth, huge swings in home sales in both directions are the norm.
  • Fifth, declining median price says something about demand and what the marginal buyer can afford.
  • Finally, existing home sales are up a mere 0.6% from a year ago.

That said, this was a decent report, especially given the 2.4 percent drop in the pending home sales report.

Yet, something went amiss in that pending home sales report, or these sales will be revised lower next month.

Mike “Mish” Shedlock

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October 20th, 2016

Posted In: Mish Talk

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