July 2013 Existing Home Sales — Best in Four Years — Year-Over-Year Homes Sales Up 17.2 Percent, Median Price Up 13.7 Percent — Likely to Cool as Interest Rates Rise, But Still Going to Be Up

Existing home sales continue to significantly improve, with the July 2013 seasonally-adjusted annualized rate hitting the greatest level in almost four years, according to the National Association of Realtors (NAR). For the month of July, the SAAR of existing home sales tallied 5.39 million, up from 4.6 million in July 2012, a gain of 17.2 percent. Median home prices in July of this year hit $213,500, a gain of 13.7 percent from a year ago when the median price was $187,800. This was the highest median price recorded since June 2008.

On a 12-month moving average – my preference (discussed below) — home sales reached a SAAR of 4.975 million in July 2013, a gain of 11.6 percent year-over-year. Sequentially from June 2013, again using a 12-month moving average, sales were up 1.34 percent. Median price on the 12-month moving average (which better shows trends), now $187,480, increased 1.34 percent sequentially from June 2013, and is up 9.8 percent year-over-year.

So why do I prefer a 12-month moving average? A single month does not make a trend. If you read my blog, you know that I prefer to use the 12-month moving average of both sales numbers and median prices. There are multiple reasons to use the 12-month average. First, the monthly data are almost always revised, so what may originally appear preliminarily, a gain or a loss may change 30-days later. While the latest month may be much greater or less than a year ago, the change may have taken place long prior to the latest month. And finally, the data from the latest month may be an aberration from weather, interest rates, jobs (or lack thereof) or any other distraction or stimulus that changed sales numbers or the price-end-of-the-market selling. Hence the importance of the 12-month moving average versus a single month comparison.

Housing continues a robust recovery. Details from the NAR release:

  • All-cash sales in July made up 31 percent of total existing home transactions, unchanged from June 2013
  • One year ago, foreclosures and short sales tallied 24 percent of all existing home sales, and now just 15 percent, 6 percent were short sales and 9 percent foreclosures
  • Short sales had an average discount of 12 percent compared to non-distressed real estate, with foreclosures discounted 16 percent
  • Investors bought 16 percent of all properties in July 2013, down from a 22 percent peak in February 2013
  • Short sales were on the market a median 72 days, foreclosures 50 days, and non-distressed real estate 40 days
  • First-time homebuyers represented just 29 percent of the closings, down from 34 percent a year ago — affordability is just starting to come into play given rising interest rates
  • Months inventory remained static at 5.1 months even though the number of available listings increased 5.6 percent to 2.28 million active listings. One year ago saw a 6.3 month inventory of listings available for sale based on the sales rate at that time. Most real estate economists agree that a 6-month inventory is normal
  • Current U.S. median existing home (monthly) price is just 7.3 percent less than the peak seen in July 2006 (single month comparison) —12month moving average is down 16.4 percent from the July 2006 peak
  • 17 months consecutive year-over year price increases, an interval of gains last seen commencing January 2005
  • Almost one-half of the homes sold (45 percent) were on the market for less than a month

To read the entire release from NAR click http://www.realtor.org/news-releases/2013/08/existing-home-sales-spike-in-july

The recovery continues.

We are heading to a 12-month moving average SAAR sales level of 6 million, in my opinion, by December 2015, if not sooner – the new normal for existing home sales.

Ted

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