Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.
Today's Focus: August Existing Home Sales
As we've highlighted, there's limited usefulness in the EHS report on the sales side since the data is well-telegraphed by the Pending Home Sales report. We show this in the 1stchart below, where we've offset the EHS data by one month to show its correlation to PHS on a 1-month lag.
Interestingly, however, since the trough in transaction volume in March, the relationship has exhibited more volatility and a longer lag with Existing Home Sales re-converging to PHS in a recurrent, every other month periodicity (2nd chart below).
Despite the limited real-time utility in terms of demand trends, there is value in the data on inventory and the composition of sales (first-time buyers, cash buyers, investor share).
TOTAL EXISTING HOME SALES: Total EHS fell for the first time in five months as sales declined -1.8% MoM against downwardly revised July figures with the year-over-year rate of change deteriorating to -5.3% in August from -4.5% in July.
Pending home sales have advanced +12.4% since the trough in March vs +10% for EHS and, given the recent pattern highlighted above, its likely we see a modestly better sequential EHS print in September. From a growth perspective, comps continue to get progressively easier through the balance of the year.
REGIONAL: The South and West regions registered sequential declines in sales while the Northeast and Midwest saw modest gains. Sales across all regions remain negative on a YoY basis.
INVENTORY: On a unit basis, existing home inventory declined -1.7% MoM, marking the 1st month of sequential decline in supply since December of last year. On a months supply basis, inventory was flat sequentially at 5.49 in August and up +10.3% YoY
HOME PRICES: Median Home prices declined sequentially across all regions while continuing to rise in the mid-single digits YoY across the South, Midwest, and West.
OTHER: The decline in investor activity is tangible evident in the data now as Distressed sales declined to 8% of the market (down from 12% last year) and cash sales declined to 23% - their lowest level since December of 2009 and down from 29% in July. First-time homebuyers held at 29% of the market while median time on the market fell to 53 days from 49 and 43 days last month and last year, respectively.
About Existing Home Sales:
The National Association of Realtors’ Existing Home Sales index measures the number of closed resales of homes, townhomes, condominiums, and co-ops. Existing home sales do not take into account the sale of newly constructed homes. Existing home sales account for 85-95% of all home sales (new home sales account for the remainder). Therefore, increases in existing home sales tend to signify increasing consumer confidence in the market. Additionally, Existing Home Sales is a lagging series, as it measures the closing of homes that were pending home sales between 1 and 2 months earlier.
The NAR’s Existing Home Sales index is published between the 20th and the 22nd of each month. The index covers data from the prior month.
Joshua Steiner, CFA
Christian B. Drake