Posts Tagged ‘NAR’
Home prices up, sales down
Reuter’s reported this morning that sales of existing homes are down and prices are up. Economists had forecasted an increase year-over-year of 0.6%, according to National Association of Realtors statistics, which would have been a pretty good jump. In fact, sales actually fell by 2.2% from June, 2017 to June, 2018.
Sales rose in the northeast and Midwest, but fell in the west and south. Existing home sales make up about 90% of the market (the other 10% from new homes). As we’ve reported before, rising costs and lack of infrastructure are driving up new home prices and driving down new home availability. This means that demand drives up prices, and ultimately drives down volume. (This was the part of the supply/demand equilibrium lecture that drove so very many college freshmen to major in something other than economics.) Annual wage growth has been stuck below 3% for some time now, and median house prices are now up 5.2% from last year, to a record high of $276,900. According to NAR, this is the 76th consecutive month with year-to-year price gains.
Supply at the lower end of the market — starter homes and rental homes — dropped by 18% from last year. This is problematic since first-time buyers accounted for 31% of all transactions in June. However, economists estimate that in a healthy market, first-time buyers would account for a 40% market share. All in all, these are not the signs of a healthy housing market.
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Quarterly Phily FED survey
Hey, gang! It’s been a while! I’ve been having a darned good winter, how about you? It’s been busy, I’ll say that, hence the gap since my last post.
Anyway, as you may know by now, I’m a regular follower of the Phily Fed’s quarterly survey of economic forecasters. It’s a delightfully simple model — just ask a not-so-random group of economist where they think the economy is headed, then look at both the central tendency (you know, mean, median, mode, that stuff) as well as the dispersion of forecasts (standard deviation, median absolute deviation, stuff like that). The results are not only interesting in and of themselves, but also it’s fascinating to track what the forecasters were saying a quarter ago compared to what they’re saying now (which the FED does).
For example, the forecasters, PREVIOUSLY (end of the year last year) projected that GDP growth for 2018 would be 2.5% (real, annualized), the unemployment rate would be 4.1% on average (and 4.0% at year-end) and that we would add 163,400 folks to the nation’s payrolls on average each month during the year. Today, however, these same forecasters have up’d the ante a bit, forecasting real GDP growth at 2.8% for the year, average unemployment at 4.0% (and ending the year at 3.8%) and adding 175,100 workers to payrolls per month.
Now, don’t get too excited, folks, because as with everything the “devil’s in the details.” A big chunk of the change comes from shifting the shape of the new employment curve. Previously, the forecasters projected a fairly flat payrolls change over the year — not bad, just flat. However, new forecasts project this to be skewed to the early part of the year, and then declining after the summer. Indeed, 2019 is currently projected to be anemic. Early employment numbers has the effect of driving up GDP (people earn and spend money for more months in the year). Note that when we look at the dispersion of GDP growth, there is some great news (very little sentiment for a recession this year) but also some not-so-great news (very little sentiment for growth above 4%).
The Phily FED also surveys for inflation projections, but that’s been flat-lined for years now. Current CPI projections for the year are 2.1%, which is the same as previous projections. Of more specific interest to us at Greenfield, the Phily FED is now reporting forecasts of house price growth for the coming two years, although rather than use their regular panel they are synopsizing several publicly available indices (Case-Shiller, FHFA, CoreLogic, and NAR). In general these indices point to price growth from 4% to 5.2% this year, and slightly lower growth (3.3% to 5.1%) next year.
There’s a bit more to the survey, and if you’d like you’re own copy, just click here.
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U.S. housing market — good news and bad
The good news, such that it is — home sales are inching up — a 0.7% rise in January from the previous January.
Now, for the bad news — the median home price in America, measured on a January-to-January basis, just hit its lowest point in 10 years, according to a recent announcement from the National Association of Realtors. Indeed, 35% of home sales were “distress sales”, driving the median home price down to $154,000.
- graphic courtesy CNN-Money
This represents a 6.9% price decline from 2011, and a drop of 29.4% since the peak in 2007.
From a small northwestern observatory... 