Popular Economics Weekly
Total existing–home sales, which are completed transactions that include single–family homes, townhomes, condominiums and co–ops, increased 4.7 percent to a seasonally adjusted annual rate of 5.55 million in September from a slightly downwardly revised 5.30 million in August, and are now 8.8 percent above a year ago (5.10 million).
This is the best sales total since 2007. Total housing inventory at the end of September decreased 2.6 percent to 2.21 million existing homes available for sale, and is now 3.1 percent lower than a year ago (2.28 million). Unsold inventory is at a 4.8–month supply at the current sales pace, down from 5.1 months in August.
Lawrence Yun, NAR chief economist, says a slight moderation in home prices in some markets and mortgage rates remaining below 4 percent gave more households the confidence to close on a home last month. “September home sales bounced back solidly after slowing in August and are now at their second highest pace since February 2007 (5.79 million),” he said. “While current price growth around 6 percent is still roughly double the pace of wages, affordability has slightly improved since the spring and is helping to keep demand at a strong and sustained pace.”
“Despite persistent inventory shortages, the housing market has made great strides this year, backed by an increasing share of pent–up sellers realizing the increased equity they’ve gained from rising home prices and using it towards trading up or moving into a smaller home,” says Yun. “Unfortunately, first–time buyers are still failing to generate any meaningful traction this year.”
First–time buyers fell to 29 percent of sales in September after climbing to their highest share of the year in August (32 percent). This was the same as one year ago, when first–time buyers also represented 29 percent of all buyers.
It tells us several things. Firstly, it explains the surge in new-home construction, now up to 1.206 million units in September, and the rise in builder optimism to the highest level since 2005 and the beginning of the Great Recession.
Econoday reported that a strong gain in current sales gave a major boost to the housing market index which, coming in at 64 for October, topped Econoday’s high-end forecast for the highest reading since 2005. Current sales, the most heavily weighted component, rose 3 points to 70, strength that points to further gains for new home sales. Pointing to gains for permits and for future sales is a striking 7 point gain to 75 in expected sales six months from now.
Still slightly sub-par traffic, unchanged at a sub-50 level of 47, isn’t holding down sales, though the lack of traffic does point to lack of participation from first-time home buyers. Otherwise, this report is a standout for the housing outlook and will raise expectations for strength in tomorrow’s housing starts & permits report, which did rise.
The increase in sales and optimism is understandable with 30-year conforming fixed rates still at 3.50 percent, and so-called Hi-Balance conforming fixed at 3.625 percent (up to maximum $625,500 amount for single home in most counties) in California for less than one origination point.
Harlan Green © 2015
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