US Existing Home Sales: July 2020

Earlier this month very strong US housing starts data surprised everyone: Single-family housing starts in the US for July 2020 were at a rate of 983,000, as in June up +17%. The number of residential projects authorized but not yet started also advanced, to 101,000 units in July, the biggest backlog since the end of 2018.
Single-family construction rose by more than +8% and single-family permits increased +17% to a 983,000 rate, the strongest since February.

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In the latest news, the US National Association of Realtors said Friday sales of existing homes rose +2% to a seasonally adjusted annual rate of 5.86 million units last month from 4.7 million in June. Home prices also shot to a record US$304,100, and a shortage of inventory is making competition for houses fierce. The average time on the market fell to 22 days in July, a record low, from 24 in June, and nearly 70% sold in less than a month.
Combined with June’s +20% gain, home sales have mushroomed by nearly +50% in two months to fully retrace the cratering in residential real estate activity in spring.
As for relentlessly increasing building materials prices, for the week ending August 14, 2020, prices of standard construction framing dimension softwood lumber items shot up yet again. Benchmark softwood lumber item Western S-P-F 2×4 #2&Btr KD price increased a mind-boggling +80, or +12%, to US$746 mfbm (net FOB sawmill), from US$666 the previous week. The price for this lumber commodity was up +$192, or +35%, from one month ago. Compared to the same week in 2019, when this item was selling for US$342 mfbm, it is up +$404, or an unprecedented +118%.

Softwood Lumber Prices as Leading Indicator of US Home Building

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There were 1.5 million previously owned homes on the market in July, down -21% from a year ago. The median existing house price increased +8.5% from a year ago to a record US$304,100 in July. The median price is up 8.5% from a year ago and marks 101 straight months of year-over-year gains.
At July’s sales pace, it would take 3.1 months to exhaust the current inventory, down from 4.2 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.