Existing home sales flat in January
Once a month, the NAR (National Association of Realtors) reports existing home sales figures. The seasonally adjusted numbers relate to completed transactions in single-family homes, condominiums, townhouses, and co-ops.
The report includes data points such as existing home sales, inventory of houses for sale, median house prices, mortgage rates, and median times on the market. In January, existing home sales were an annualized 5.5 million, more or less flat with December. On a YoY (year-over-year) basis, they’re up 13%. January’s decline was largely due to new regulations from the Consumer Financial Protection Bureau, which caused delays in closings.
At the end of January, there were 1.8 million existing homes for sale. This represents a four-month supply. A level of 6 to 6.5 months means a balanced market. Days on the market rose to 64 days from 58 days in December.
Prices rose in the mid-single-digit range
The median sale price for an existing home in December was $213,800, up 8.2% on a YoY basis.
Of course, income growth has been tough to come by, which is again stretching the historical relationship between wages and home prices. The ratio of median home prices to median income ratio is 3.9x, well above the historical range of 3.2x to 3.6x.
Homebuilders are still holding back
Fourth-quarter earnings are largely finished, and most builders did well. Deliveries remained somewhat flattish on a unit basis, and revenue growth is coming from price increases. For the most part, builders reported declining gross margins, which means buyers are getting more price-conscious and builders must promote more in order to get buyers to step up.
Builders have also started allocating resources to multifamily construction. This is especially true for Toll Brothers (TOL), which is concentrating on luxury urban apartments. Region matters as well, as Lennar’s (LEN) numbers show.
Investors who want to gain exposure to the entire homebuilding sector should look at the SPDR S&P Homebuilders ETF (XHB).