Home Sales — A Joint View
Typically, monthly sales data for new and existing homes are reported separately, due to the different dates when each is released. So, typically, they are analyzed isolated from each other. But it’s interesting to look at them together, as seen below, first reviewing the data combined for both types of homes, followed by brief commentary about each individually. Both types of housing serve the same purposes: providing shelter as well as a way to accumulate wealth.
Houses sold in November at the annual rate of 6.1 million, a rate of 50,000 fewer than the previous month, when 6.15 million houses were sold; in fact, November’s combined sales are down 1.3% from the month before. However, this is an improvement over last year, since home sales in November were 4.1% above 2018, when they were sold at an annualized rate of 5.83 million units.
Since February, as shown in the chart above, total home sales have fluctuated around a 6 million unit annual rate — with no clear indication of either a positive or negative trend.
Sales of existing homes fell 1.7% in November to a rate of 5.35 million units; they represent nearly nine of 10 homes sold (88% for November.) But new-home sales, at a rate of 719,000 units, were 1.2% above the previous month (note that the two charts below use different scales for easier interpretation).
The charts below show that sales of new homes have had an upward trend since the beginning of the year, while existing-home sales seem to have stagnated over the last few months.
Year-to-date through November, a total of 5.545 million houses have been sold (including both new and existing homes) — exactly the same number that were sold in the same period last year. Interestingly, sales of new homes jumped by nearly 10% to 635,000 homes sold so far in 2019, while existing-home sales fell by slightly more than 1% for a total of 4.91 million houses sold.
South and West Dominate Activity
The old maxim of “location, location, location” plays a crucial role in this uneven geographic sales performance. The Northeast and Midwest regions generally have significantly lower population growth than the South and West, which show much more buoyant population growth. The South, in particular, has posted the largest population growth numbers since 2010, when the last population census was taken, which naturally leads to more demand for housing.
Mortgage Rates Remain Stable
Once more, mortgage rates remained virtually unchanged last week. The 30-year fixed rate moved marginally higher by just 0.01% to 3.74%, up from 3.73% the previous week.
This minor movement is not expected to impact new construction or home sales.
Manuel Gutierrez, Consulting Economist to NKBA
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal, indicating that the latest value is improving; “Yellow,” as it’s commonly understood, denotes caution because the variable may be changing direction; “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.
Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single-Family Starts. This is the number of single-family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing-Home Sales. These data are issued monthly by the National Association of Realtors and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series are sales of new homes priced at $500,000 and higher. The data are released quarterly by the U.S. Department of Commerce and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building-Materials Sales. These data, released monthly by the Department of Commerce, capture total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.
Appliance-Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as home centers.
We hope you find this dashboard useful as a general guide to the state of our industry. Please contact us at Feedback@nkba.org if you would like to see further detail.