- by New Deal democrat
First of all, my usual caveat: 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.
But more than sales, since the pandemic the dynamics that have been more important have been prices and inventory. Because during the pandemic prices skyrocketed, and inventory cratered. It has been a long, slow arduous process of rebalancing since then.
For the record, let me start with sales. These have been rangebound between 3.85 million annualized to 4.35 million for the past three years. And although they increased from April by 13,000, and were 6% higher than one year ago, they remained rangebound with sales of 4.17 million annualized in May. This is also only 3.2% higher compared with one year ago:
As you can easily see, the current range is well below the pre-COVID average of roughly 5.5 million annualized sales.
So now let’s turn to the metrics that most need to be normalized: prices and inventories. Note that these are not seasonally adjusted, so the only good way to look at them is YoY.
The median price for an existing home in May was $429,300, up a mere 1.3% from one year ago:
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 the inventory of existing homes for sale remain well below their pre-pandemic levels. In May these were 1.55 million units annualized, up only 10,000 from one year ago, a 0.6% YoY increase. This is nowhere near what is necessary, as shown in the 10 year graph below:
The current level is still only about 80% of what it would take to return to pre-COVID normalcy.
Finally, last week the NAR also updated its information on new (red, right scale) and total (blue) listing counts:
As you can see, these are also very seasonal. In general, the number of listings has been improving. But, as the YoY% graph of the same data shows below, the improvement has all but come to a halt in the last few months, with active listings only up 2.2%, and new listings only up 2.1%:
This year the housing market has appearred to reach a sub-optimal post-COVID equilibrium, with sideways sales and prices, and at best slowly increasing inventory. Needless to say, the increase in mortgage rates since the onset of the Iran war has not been helpful. The US simply needs much more housing to be built to return to some kind of affordability.
