Existing home sales posted a seasonally adjusted annualized rate (SAAR) of 5.81 million dwelling units in November 2017, up 3.8 percent versus a year ago and the most seen since December 2006, according to the National Association of Realtors® (NAR). Median price of $247,000 (not seasonally adjusted), posted a 5.8 percent gain versus a year ago. Median prices have now increased for 69 consecutive months on a year-over-year basis.
The following graph shows the monthly median price and the total number of home sales in the prior 12 months commencing January 2014. Total housing sales (raw monthly data – not seasonally adjusted) for the 12-month period ending November 2017 of 5.52 million was up 1.3 percent versus the 12-months ending November 2016 (5.45 million).
The next graph shows the monthly raw data (not seasonally adjusted) for each month commencing January 2014. Following that are median prices for the same time period. With just a 3.6 month estimated inventory on a seasonally adjusted basis with six months considered normal, supply continues to trail demand, resulting in rising home prices. The 1.67 million listings for sale as of the end of November was down 9.7 percent compared to a year ago.
The final graph shows average home prices (not seasonally adjusted), which peaked at an all-time record $303,500 in June of 2017. The decline since then is all due to the natural seasonal effect.
Other metrics and insights from the NAR release included:
- All-cash was paid 22 percent of the time similar to the 21 percent level a year ago
- Investors bought 14 percent of all October transactions, unchanged from a year ago
- On a non-seasonally adjusted basis there was just a 3.4 month inventory of homes available for sale as of the end of November 2017 compared to 4.0 months a year ago
- Typical time on the market was 40 days in November 2017 versus 43 days a year ago. 44 percent of the homes sold in November were on the market less than one month
- 1st time homebuyers made up just 29 percent of all transactions in November 2017, down from 32 percent a year ago
- Distressed sales once again made up just four out of every 100 transactions in the month, with three being foreclosures and just one out of 100 a short sale
These data are historical and were under tax laws and implications that have just changed given the passage of the 2017 Tax Cuts and Jobs Act. Two major changes for homeowners include:
- Reduction in the Mortgage Interest Deduction (MID) shrinking from $1 million to $750,000. First and foremost note that current homeowners with a loan ranging from $750,001 to $1 million will still have full deductibility from interest paid on their primary dwelling. They essentially are grandfathered in on their current deductions for loans from $1 million and down. This will not impact existing mortgage loans in place. NAR reported in their press release that just 6 percent of homes today have loans greater than $750,000, so this change will likely impact just one in 20 home transactions that have mortgage loans purchased in the coming year.
- Prior to the latest tax law changes, individuals were able to deduct from their Federal tax return the amount they paid is state and local taxes including income tax, property taxes and sales taxes. That deduction is now limited to a total of $10,000. Thus homeowners with property taxes greater than $10,000 will be capped at that deduction level. NAR reports that just one-in-20 (5 percent) pay more than $10,000 annually in property taxes. Those states, however, with state and local income taxes, may pay more total taxes, however.
To read the entire press release from NAR click https://www.nar.realtor/newsroom/existing-home-sales-soar-56-percent-in-november-to-strongest-pace-in-over-a-decade
Still am sticking with my forecast of a 1.96 percent increase in 2018 despite record-tight inventories in many markets. Texas and Florida (hurricanes) and California-Idaho-Washington (fires) housing markets should boom in 2018 assuming no new exogenous shocks as markets post-disaster typically out-perform. See my white paper on the impact of Hurricanes at http://blog.stewart.com/stewart/2017/09/13/hurricanes-housing-and-the-economy-analysis-from-stewart-chief-economist-ted-c-jones-phd/