Economic & Housing Weekly Note

Existing Sales Rise While Inventories Hit Record Lows

January 24, 2020

Key Takeaways:
 

  • Sales of existing homes rose 3.6 percent in December to a seasonally adjusted annualized rate (SAAR) of 5.54 million, the highest level since February 2018. The months’ supply fell seven-tenths to 3.0 months, the lowest months’ supply in the history of the existing sales report.
  • The Conference Board Leading Economic Index® (LEI) fell 0.3 percent in December, the fourth decrease in five months, and declined 0.4 percent over the second half 2019, a reversal from the 0.5 percent growth seen in the first half of the year.
  • From a year earlier the FHFA Purchase-Only House Price Index showed that home price appreciation decelerated in November to 4.9 percent, tying the slowest pace of growth for the year.
Forecast Impact

We expected an increase in existing home sales in December, but the reported increase was stronger than we had forecast. Given the faster pace of sales, we may make modest upward revisions to our existing homes sales forecast going forward, but we expect growth in existing home sales to level off in the coming months as record low inventories limit the potential for sales. However, we believe low inventories should prompt further growth in new home construction in the coming months. The December release of the Conference Board’s LEI supports our forecast of a moderation in growth and highlights the continued strength in consumer credit and expectations.

Existing Home Sales Rise to the Highest Level in Almost Two Years

 

Home Price Growth Ties Slowest Pace of Growth in Five Years


Details on Key Takeaways and Other Releases

  • Existing home sales rose 3.6 percent in December to a SAAR of 5.54 million, according to the National Association of REALTORS®. Single-family sales increased 2.7 percent to 4.92 million, the fastest sales pace in almost two years. Condo/co-op sales jumped 10.7 percent to a seasonally adjusted 620,000. The median sales price, which is not adjusted for the mix of sales, increased 8.0 percent from the prior year, the fastest annual pace of growth since January 2016. The months’ supply fell seven-tenths to 3.0 months, the lowest months’ supply in the history of the series. For-sale inventories fell on a year-over-year basis by 8.5 percent, the seventh consecutive month of year-over-year declines. Year to date, existing home sales were 1.2 percent below the same period during the prior year. For all of 2019, existing sales ended at 5.34 million, the same level as in 2018.
  • The Conference Board’s LEI, a gauge of the economic outlook over the next three to six months, fell 0.3 percent to 111.2 in December, the fourth decrease in five months. The decline was driven by negative contributions from unemployment claims, building permits, and the ISM® New Orders Index. Equity prices, consumer expectations for businesses, and interest rate spreads were some of the largest positive contributors. The contribution of new manufacturers’ core orders (nondefense, excluding aircraft) was unchanged.
  • The FHFA Purchase-Only House Price Index, reported on a seasonally adjusted basis, rose 0.2 percent in November. From a year earlier the index grew 4.9 percent, tying the slowest pace of growth for the year.

Ricky Goyette
Economic and Strategic Research Group
January 24, 2020

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