The National Association of Realtors® (NAR) just reported November 2013 existing home sales. On a seasonally adjusted annualized rate (SAAR), November sales came in at a preliminary level of 4.9 million, down from 4.96 million a year ago and sequentially off 4.3 percent from October 2013. This was the first time in 29 months that year-over-year home sales fell (but just a little). Median price increased 9.4 percent year-over-year to $196,300.
When examined based on a 12-month moving average of the median price and SAAR sales level (to remove the random variations from one month to the next and better illustrate trends), median price was up 11.7 percent year-over-year and sales were up 10.1 percent. Sequentially from October 2013, however, sales were down slightly.
The following two graphs show the difference in the base data as reported by NAR (no 12-month moving average) versus the 12-month moving average of the seasonally adjusted annualized rate of sales and median prices. It is obvious that seasonality does exist in home prices.
So which approach is the best to detect trends of sales and price of existing homes? Each has merit. But I believe the 12-month moving average better shows trends.
The graph below shows both the unadjusted and 12-month moving averages commencing 2011. On the left is the unadjusted monthly median sales price and the SAAR of sales. On the right are the 12-month moving averages of both sales and price. Each indicate a decline in the number of sales. The 12-month average of median price on the right, however, would indicate continued rising prices while unadjusted data on the left might lead the reader to assume declining prices. For the prediction of trends, I stick with the 12-month moving averages.
Other points in the NAR November sales release included:
- First-time homebuyers made up three out of every 10 sales (28 percent)
- All cash transactions remained in the low 30 percent range (32 percent), essentially the same as the 30 percent level recorded a year ago
- Once again, investors bought one of every five homes (19 percent) the same as October
- 70 percent of investors paid cash
- Months inventory tallied 5.1 months, up slightly from the 4.9 months in October
- Median time on the market in November was 56 days versus 54 days the prior month, but substantially lower than then 70 days on the market a year ago
- Short sales took 120 days to close, foreclosures 59 days and non-distressed housing 55 days
- One third (35 percent) of all homes closed in less than one month
- Foreclosures made up just 9 percent of all sales, and sold at a discount of 17 percent when compared to non-distressed real estate
- Short sales represented just 5 percent of all residential closings, selling for a 13 percent discount compared to non-distressed sales
To read the entire NAR press release click: http://www.realtor.org/news-releases/2013/12/existing-home-sales-decline-in-november-but-strong-price-gains-continue
Am I concerned about a decline in sales? No. First, Q4 is normally the second slowest quarter in home sales. Second, these are preliminary numbers subject to modification several times. Finally, in a more normal market (which is where we are heading) you should not expect a gain each and every month.