Existing Home Sales Sputter Again in August 2018: Sales Down 1.5% on a Seasonally Adjusted Basis, But Median Prices Up 4.6 Percent

Existing home sales for the second month in a row dipped 1.5  percent in August 2018 versus a year ago to 5.34 million on a seasonally adjusted annualized basis (SAAR) according to National Association of Realtors® (NAR).  Sales were flat sequentially from July (SAAR).  On an unadjusted basis, housing sales in the first eight months of 2018 totaled 3.739 million, down 1.23 percent from a year ago (see the table below).  Sales for the month of August 2018 came in at 539,000 versus 535,000 a year ago, a minimal 0.7 percent gain.

The August 2018 median price was $264,800, up 4.6 percent from a year ago, and the average price ($303,200) up 3.0 percent year-over-year.  The median and average prices in June 2018 set all-time records, with the declines in July and August due to normal seasonality.  Median price has now risen 78 consecutive months on a year-over-year basis.

The following graph shows the trend in housing sales based on a trailing 12-month basis (TTM), but with monthly median prices.  Sales have wobbled in the past year, but have showed a slight uptick for the 12-months ending in July and August 2018.

Sales and median prices are shown on a monthly basis in the following two graphs.  Sales have been up in four of the eight months this year on a year-over-year basis.  Median price, on the other hand, continued on an upward accent driven by minimal inventory of just 4.0 months (seasonally adjusted) with 6.0 months considered normal (contrasted to 3.9 months a year ago).  The inventory of available listings tallied 1.92 million, up slightly from 1.87 million a year ago — a 2.7 percent increase.

 

The trend and corresponding seasonality in average prices are shown in the next graph.

Other metrics and insights from the August 2018 NAR release included:

  • 52 percent of the sales closed in August were on the market less than one month, with the typical property lasting just 29 days from listing to a having a signed purchase contract
  • First-time homebuyers were present in three-out-of-every 10 transactions (31 percent) — unchanged from a year ago
  • Investors acquired  13 percent of all sales in August 2018, the same as the prior month but down from 15 percent a year ago
  • All-cash sales made up one-in-five closings (20 percent) in August
  • Distressed sale made up 3 percent of August’s closings.  Foreclosures made up 2 percent and short sales 1 percent
  • Million dollar and up homes made up 3.5 percent of all sales in August 2018, only the fourth time in history greater than the 2 percent range

 

To read the entire NAR release click https://www.nar.realtor/newsroom/existing-home-sales-remain-flat-nationally-mixed-results-regionally

 

As stated in June in the Jones on Real Estate Blog:

Where the U.S. housing market goes will be a function of jobs, interest rates, prices, incomes and inventory.  The number of sales typically peak in June (the past four years) or July and August.  

 I do now believe that 2018 housing sales will be less than a year ago, but still strong.  People have to live someplace, and in the majority of markets buying makes more sense than renting.

 No doubt rising interest rates, increased home prices and expanding apartment construction are having an impact on sales, though slight at this time.  Price will come into play at some time as the average hourly income rate in the U.S. has increased just 2.7 percent in the past 12-months and 12.6 percent in the past five years while median price jumped 2.7 percent and 29.4 percent for the same time periods, respectively.  

 

Again we go with the slowly leaking tire analogy:  the housing sales tire is still drivable at high speeds, but the warning light is on.  For now, however, housing demand remains fundamentally strong given the U.S. economy with demand  still out-pacing supply resulting in ongoing home price increases.

Ted

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