Both new and existing home sales gures for October were released in the US this week, showing signs of steady, if muted, improvement.
US New Home Sales: October 2016
The US Census Bureau and Department of Housing and Urban Development in a joint release reported that newly constructed single family homes sold at a seasonally adjusted annual pace of 563 thousand in October, down slightly from September but continuing the slow, steady upward trend of the last several years. Sales were down 1.9 per cent from September but up 17.8 per cent from last October. Builders cautiously added to available inventories.
The inventory of new single family homes for sale was 246 thousand, the highest level since the downturn.
NEW HOMES FOR SALE INVENTORY
The months of supply increased in October to 5.2 months. This is now in the normal range (less than 6 months supply is normal).
The all time record was 12.1 months of supply in January 2009.
In October 2016, 45 thousand new homes were sold (not seasonally adjusted). This was the highest sales for October since 2007.
Last year, 39 thousand homes were sold in October.
The all time high for October was 105 thousand in 2005, and the all time low for October was 23 thousand in 2010.
This was below expectations of 590,000 sales SAAR in October.
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A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted.” – US Census Bureau
US Existing Home Sales: October 2016
Existing home sales, as reported by the National Association of Realtors (NAR), increased 2.0% in October and reached the highest pace since February 2007. In October sales increased for the second straight month, and were up 5.9% from the same month a year ago. Total existing home sales in October increased to a seasonally adjusted rate of 5.60 million units combined for single-family homes, townhomes, condominiums and co-ops, up from an upwardly adjusted 5.49 million units in September.
October existing sales increased in all four regions, rang- ing from 2.8 per cent in the South to 0.8 per cent in the West. Year-over-year, October sales also increased in all regions, ranging from 10.4 per cent in the West to 1.4 per cent in the Northeast.
EXISTING HOMES FOR SALE INVENTORY
Total housing inventory decreased slightly by 0.5 per cent in October, and remains 4.3 per cent lower than its level a year ago. At the current sales rate, the October unsold inventory represents a 4.3-month supply, compared to a 4.4-month supply in September.
Inventory is still very low and falling year-over-year, down 4.3 per cent year-over-year in October, said Calculated Risk Tuesday. More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.
Two of the key reasons inventory is low:
1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the US, up from 10.7 million in 2000.Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers.
2) Baby boomers are aging in place. Instead we are seeing a surge in home improvement spending, and this is also limiting supply.
Of course low inventory keeps potential move-up buyers from selling too. If someone looks around for an- other home, and inventory is lean, they may decide to just stay and upgrade.
PENDING HOME SALES
Pending sales increased 1.5 per cent last month, and September new home sales increased 3.1 per cent. Builders continue to address the low inventory of homes as October single-family starts jumped 10.7 per cent from September. Builder sentiment remains solid, and both jobs and incomes are growing. These positive reports suggest a steady upward path for existing sales.
HOUSE PRICES
The October median sales price of US$232,200 was 6.0 per cent above the same month a year ago, and represents the 56th consecutive month of year- over-year increases. The median condominium/co-op price dropped for the fourth consecutive month to US$220,300 in October, but was up 6.2 per cent from the same month a year ago.