- Today NAR released a summary of existing home sales data showing that overall existing home sales fell by 3.2 percent from September to October 2013 but are 6 percent higher than October 2012.
- The national median existing-home price for all housing types was $199,500 in October, up 12.8 percent from October 2012, which is the 11th consecutive month of double-digit year-over-year increases.
- Low inventories, a lower distressed sales share from a year ago, and gains in sales at the high end of the market combined with falling sales at the low end of the market were all factors pushing prices higher.
- Next Tuesday, both Case Shiller and FHFA house price data will be released for September. Based on NAR data for the comparable period, expect Case Shiller to show a 12 to 13 percent price gain while FHFA should show a 7 to 8 percent gain.
- See the full NAR Existing Home Sales press release here and data tables here.
- Find a full graphical summary of the data here.
Did You Know: More than 11% of homes sold had a sales price over $500,000, and sales growth was highest among homes in above-median-priced categories.
- In spite of the price variation by region, when summed to the regional level the median sales price for all regions of the US except the West falls into the $100,000 to $250,000 price range. The West is slightly outside of this range and the Northeast is near the upper edge.
- The median price is the point at which the middle-priced home sold. By definition, half of homes in an area sold at a higher price and half of homes sold at a lower price than the median. But that’s just one part of the story. We can dig in deeper and look at the distribution of sales by price categories.
- Doing so, we see that roughly a fifth of homes sold for less than $100,000 a year ago and that share shrank in September 2013 to 17.4 percent.
- One year ago, homes sold at $500,000 or more were roughly 10 percent of the market; they now comprise more than 11 percent of recently sold homes.
- There are coincident reasons for this trend: 1) sales growth is highest among homes in the highest home price tiers, and 2) home sales are shrinking in the lowest price tier—most likely a result of limited inventory in this price range as would be expected in a housing market where prices are rising.
- Sales in the lowest price tier fell by more than 7 percent nationally while sales in higher priced categories were up by more than 30 percent from September one year ago.
- While distressed sales as a share of closed sales ticked up in September, the longer-term trend for these properties has been down. Single-digit market share of distressed properties could be seen in the months ahead. This means smaller inventories of low-priced homes and smaller sales shares for low price homes relative to high priced homes which will mean continued upward pressure on the median price of homes compared to one year ago until additional inventories help relieve some of this pressure.
- Sales growth was largest among homes in above-median-priced categories in April, and more than 10% of homes sold had a sales price over $500,000.
- In spite of the price variation by region, when summed to the regional level the median sales price for all regions of the US except the West falls into the $100,000 to $250,000 price range. The West is slightly outside of this range and the Northeast is near the edge.
- The median price is the point at which the middle-priced home sold. By definition, half of homes in an area sold at a higher price and half of homes sold at a lower price than the median.
- Sales were up from a year ago in the median-price category and all higher price tiers in all regions. Sales were only lower in the lowest price category in the West, South, and Northeast—most likely a result of limited inventory in this price range.
- Notably, in most regions, sales growth was highest in the higher price tiers. In the Northeast, sales growth was strongest in the $1 million plus category while in the Midwest and West sales growth was strongest in the $750,000 to $1 million price tier. Sales in the South showed the most strength in the $500,000 to $750,000 category and were more than 30 percent higher than a year ago in all above-median price tiers which partly explains the strong price growth in the median in that region.
- Sales in the lowest price tier began to show less growth and even decline in some areas in 2012. Unsurprisingly, this was the same period when we saw the biggest tapering off in reports of distressed sales in our survey of practitioners.
- Strength in the upper price tiers has brought the share of homes-priced greater than $500,000 among those sold to over 10 percent in April. As inventory is more plentiful in these price tiers, construction seems limited, and distressed sales are anticipated to continue to drop, expect the share of higher priced homes among those sold to remain above the 10 percent level for the duration of the summer selling season, and possibly into the off-season.
New homes should carry a premium because everything is new: carpets, appliances, paint, etc. Moreover, the new home tends to be larger. However, new homes may not necessarily be built in the best of neighborhoods simply because all the good land has already been taken. The price data still says that a typical new home is worth more than a typical existing home.
But note the big divergence above that occurred during the crash years. Because material costs and labor costs keep rising, a certain minimum price is required on a newly constructed home, otherwise builders will simply not produce. This minimum price on a typical new home was $220,000 or so. So when existing home values dramatically fell, a gap between new and existing home prices opened up. Even with recent gains in existing home values, the gap still persists. In addition, many economists expect higher commodity prices ahead in light of additional Quantitative Easing by the Fed. Therefore, if anything, new home prices have no choice but to move up further in order to cover those rising construction-material costs. The outlook for existing home prices are then very positive, particularly in those local markets where the gap between new and existing home prices remain very wide.