Pick a Number — Existing Home Sales November 2019

In this day and age of mathematical precision and faster-than-light calculation speeds, answering the question as to existing home sales numbers and direction almost makes one stutter.   The following bullets summarize November existing home sales statistics.  Pick a number — pick any number — and what you saying is probably  correct.  Each of these data points were taken from the National Association of Realtors® (NAR)) press release and supplied statistics.

Existing home sales were:

  • Up 2.7 percent on a seasonally adjusted annualized basis in November 2019 compared to one year ago
  • Up 0.2 percent on a seasonally adjusted annualized rate comparing all of 2018 to November 2019 (up to 5.35 million sales compared to 5.34 million for 2018)
  • Down 1.7 percent on a seasonally adjusted analyzed basis compared to October 2019, i.e. down sequentially
  • Down 1.1 percent on a trailing 12-months basis as of November 2019
  • Down 0.5 percent comparing the actual sales (not seasonally adjusted) for November 2019 versus November 2018
  • Down 1.1 percent when expressed as year-to-date change in sales, not seasonally adjusted

Like I said, “Pick a number.”  My favorite statistic would be comparing either actual closed sales in November to one year ago, or comparing just the closed sales for the prior 12-months to 12-months earlier.  Hence the best estimate of existing home sales for 2019 as of November based on these two statistics would be down from one-half percent to down 1.1 percent.   What metric did NAR lead with?   Their headline was, “Existing Home Sales descend 1.7 Percent in November.”

To muddy the water further, take a look at three of these metrics in the following graphs.   The first shows NAR’s choice statistic of sales on a seasonally adjusted annualized basis.  Using 2018 as a reference, sales are down from 5.340 (2018) million to 5.35 million (2019) – almost no change what-so-ever.  The graph shows existing home sales on a seasonally adjusted annualized rate (black line) with median home prices (green bars).  Sales peak each year in June with troughs in the January-February months.

The next graph shows my favorite sales statistic, the number of sales in the prior 12-months.  Since this reflects actual closed transactions, it more resembles and tracks real estate agent income. Based on total sales in 2018 versus the 12-month ending November 2019, existing home sales are down 1.0 percent this year.

The last sales graph shows the number of actual closings per month.  Sales were up in 2019 compared to 2018 in just four of the 11 months thus far this year.

Other data in the NAR release included:

  • $271,300 median sales price in November was up 5.4 percent versus a year ago
  • Typical property was on the market 38 days prior to going under contract, down from 42 days a year ago but up from 36 days in October
  • 45 percent of the homes sold in November were on the market less than one-month
  • Investors bought 16 percent of the homes sold in November versus 14 percent in October and 13 percent in November 2018
  • 1st-time buyers made up 32 percent of all November closings, similar to the 33 percent seen one year ago
  • One-in-five sales were all-cash transactions (20 percent)
  • Inventory of listings for sale of 1.645 million units was down 7.3 percent compared to 12-months ago, with inventory at an estimated 3.9 months.  Normal inventory is 6.0 months, making this still a seller’s market in general

When you read the various forecasts for 2020, even though the projections vary from one economist to the next, they may be saying the exact same thing depending on which statistic is being referenced.  My choice of statistics is the total number of actual sales in the prior 12 months.  Why that statistic?   Real estate agent income is a function of the number of closings, median price and the commission.   The actual number of closings (not seasonally adjusted) is the most important sales metric when it comes to calculating income

My forecast?   Existing home sales will be down 3.6 percent based on total actual sales (closings) in 2020 compared to 2019.   That forecast will likely change when the final sales tally for 2019 becomes available sometime in January.  Stay tuned – you will have a chance to pick another number.

Pick a number.  There are several to choose from and at least one of them is probably close to correct.

To read the entire November 2019 press release from NAR click https://www.nar.realtor/newsroom/existing-home-sales-descend-1-7-in-november

Ted

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