Existing home sales, prices, and inventory remain rangebound
– by New Deal democrat
Although they constitute about 90% of all housing sales, I don’t pay too much attention to existing sales because they are not nearly so important as new home sales, since the latter involve much more economic activity in the building process, plus more landscaping and furnishings.
As I’ll show below, what has been happening with prices and inventory is more interesting than what has been happening with sales themselves, which have been rangebound between 3.85 million annualized to 4.35 million for the past three years.
And rangebound they remained in April, with a 5,000 annualized monthly increase to 4.02 million. This is also only 0.5% higher compared with one year ago:
Although I’m not showing the 10 year graph this month, the current range is well below the pre-COVID average of roughly 5.5 million annualized sales.
As noted above, the more interesting trend is in prices. These are not seasonally adjusted, so the only good way to look at them is YoY. So measured, they were only up 0.9%:
This is consistent with the near record low YoY increases (outside of the Housing Bust) in the Case-Shiller and FHFA repeat home sales indexes, and the slight YoY decline in new home prices as developers downsize to meet the market.
But in order to bring the housing market back into the equilibrium it was in prior to the pandemic, inventory has to increase, and increase substantially. There the progress is glacial, as existing home inventory was up only 1.4% YoY to 1.47 million:
Meanwhile, similar to the sideways trend in prices in both the FHFA and Case Shiller repeat sales indexes, on a YoY basis prices were only up 1.4%. As the below 10 year graph shows, inventory has mainly recovered from its post-COVID lows, it is still only about 80% of what it was in the several years before 2020.
The past few months have indicated that the housing market has reached a post-COVID equilibrium, with sideways sales and prices, and slowly increasing inventory. Unfortunately, the US needs much more housing to be built in order for it to be as affordable as it was before (actually, several decades before) COVID.
“October existing home sales, prices, and inventory continue to show slow progress towards rebalancing,” Angry Bear by New Deal democrat
The tracts around here have a couple of models that are comparable to my starter home – maybe 100-200 SF larger. They are the first ones sold out, because they are the least expensive. Mid to upper $400,000’s. When I bought my first home the rule of thumb was 2.5 times gross for an upper limit. If that rule still applied you would need a household income of near $200K for any of the new homes today. That would work for a two income family sitting at the median income in our state. Barely, which still leaves that new home out of reach for half the people. Between the cost of land and the cost of materials, I don’t see affordable new homes here in my lifetime. And that is if I live to be 100.
@Jane,
At what point to people looking for single-family detached homes decide to move to another part of the country to find the affordability they seek? There are plenty of places that offer affordable housing. Yes, many of them are in fly-over country, where we lived as home owners for 40 years. We didn’t live on the coast and didn’t have a desirable zip code, but we bought a comfortable detached home in a safe neighborhood and good public school district. Living frugally (no SUVs, no cable, no country club memberships, rare restaurant meals) we were able to pay off the mortgage in 20 years and raise a child who went on to finish college and law school.
Not a morality tale. I know some things have changed since I was in my 30s or even when my parents were in their 30s. But I’m trying to figure out exactly where the boundary between needs and wants falls.
Jane:
The other factor besides expensive homes? The interest rates. The lower the rate, the easier it is to make payments. I believe banks are an impediment also. It is difficult to get past. Then the points.
I am a veteran. So we were able to get a 4% mortgage this time around. We live off our SS too. I worked right up to my seventies which helped a lot. My salary was good for the last 10 years.
Our first home was at 8%. Our 2nd home was as 12%. Mother-in-law was living with us and licked in for the mortgage costs. Brother-in-law did not want to deal with her.
Back to the housing affordability. It is hard, We got in early this time around. Put money down and financed the rest at a low rate. Otherwise, it is discouraging. Just Jan and I on a city-type lot and 1520 square feet, small back yard, and 10 feet between each home on either side. Now they are talking about building on the lot line. This is similar to what they do in the cities. On one side they leave enough room for a walkway. That separates each house by 4 feet.
The city council approved this for the builder who has yet to start. It seems like they approve thing years before the build even starts. When I was on a Planning Commission, there were time limits and usually it was withing a year to start. If it took longer, then you needed approval again which was less difficult. The idea was to keep within a time period regardless of economic impact.
It is disappointing for a younger couple. However, you have to start somewhere. Hopefully, they have a good education, maybe a tradesman of sorts, or occupation is in demand. Maybe parents can kick in too?
Jane, I am with you on this.