Weekly Economic Report

Weekly Economic Report 1.29.18

KEY MARKET INDICATORS as of Jan 29, 2018

December Home Sales

Existing home sales decreased 3.6% m/m to a seasonally adjusted annual rate of 5.57 million units in December. For the full year, existing home sales increased 1.1% to 5.5 million units, the best level since 2006. But growth in existing home sales have slowed since 2015 because of lower inventory. Inventory level continued to fall in December, decreasing 11% to 1.48 million units. The implied supply at current pace of sales fell to 3.6 months – reaching the lowest level since 1999 when the National Association of Realtors began tracking housing inventory. Homes were sold quickly after listing. Typical homes stayed on the market for just 40 days in December, vs. 52 days a year ago. For realtors and loan officers, this means that while homebuyers may need more time finding the right home, once they have found the right one, they will act fast to close the sale. The tight housing market condition continued to drive home prices higher, with the median home price up 5.8% from a year ago to $246,800. Rising home prices means that the average loan balance is larger, additing to origination volume. The Federal Housing Finance Agency announced in November that the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2018 will be $453,100, an increase from $424,100 in 2017.

New home sales decreased 9.3% m/m to a seasonally adjusted annual rate of 625,000 units in December. For the full year, new home sales increased 8.3% to 608,000, which is slightly below our expectation of 10% year over year growth. The median sales price for new homes increased 4.3% to $321,100 in 2017. Growth rate in new home sales was very skewed to the top in 2017 as homebuilders continued to focus on repeat-buyers and luxury buyers.

<$300K: -1%
$300-400K: 9%
$400-500K: 14%
$500-750K: 21%
$750K+: 35%

For 2018, we expect new home sales to continue to drive growth in transaction volume. We also expect low inventory to fuel further growth in home prices.

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