February 2017 Headline Existing Home Growth Pace Slows

The headlines for existing home sales growth pace declined saying “too few properties for sale and weakening affordability conditions stifled buyers in most of the country”. Our analysis of the unadjusted data shows much of January’s sharp increase in sales were wiped away with the poor February sales.

Analyst Opinion of Existing Home Sales

This was a poor month for home sales. I believe last month’s strong showing was an anomaly as there is no dynamic in play which suggests home sales should be improving.

Econintersect Analysis

Unadjusted sales rate of growth decelerated 5.3 % month-over-month, up 0.3 % year-over-year – sales growth rate trend accelerated using the 3 month moving average.

Unadjusted price rate of growth accelerated 1.2 % month-over-month, up 5.8 % year-over-year – price growth rate trend accelerated using the 3 month moving average.

The homes for sale inventory marginally grew this month, remains historically low for Februarys, and is down 6.4 % from inventory levels one year ago).

NAR reported:

Sales down 3.7 % month-over-month, up 5.4 % year-over-year.

Prices up 7.7 % year-over-year

The market expected annualized sales volumes of 5.430 M to 5.690 M (consensus 5.555 million) vs the 5.48 million reported.

The graph below presents unadjusted home sales volumes.

Here are the headline words from the NAR analysts:

Lawrence Yun, NAR chief economist, says closings retreated in February as too few properties for sale and weakening affordability conditions stifled buyers in most of the country. “Realtors® are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that’s pushing up price growth and pressuring the budgets of prospective buyers,” he said. “Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market.”

Added Yun, “A growing share of homeowners in NAR’s first quarter HOME survey said now is a good time to sell, but until an increase in listings actually occurs, home prices will continue to move hastily.”

“The affordability constraints holding back renters from buying is a signal to many investors that rental demand will remain solid for the foreseeable future,” said Yun. “Investors are still making up an above average share of the market right now despite steadily rising home prices and few distressed properties on the market, and their financial wherewithal to pay in cash gives them a leg-up on the competition against first-time buyers.”

NAR President William E. Brown says being fully prepared is the right strategy for prospective buyers this spring. “Seek a preapproval from a lender, know what your budget is and begin discussions with a Realtor® early on about your housing wants and needs,” he said. “Homes in many areas are selling faster than they were last spring. A buyer’s idea of a dream home in a popular neighborhood is probably the same as many others. That’s why they’ll likely have to decide quickly if they see something they like and can afford.”