Existing-Home Sales Continue Recovery in July

By Robert Hughes

Sales of existing homes rose 2.5 percent in July to a 5.42 million seasonally adjusted annual rate. Sales are up just 0.6 percent from a year ago but remain 3.9 percent below the recent peak of 5.64 million in November 2017 and 25 percent below the all-time peak of 7.25 million in 2005. Sales rose in three of the four regions tallied: sales were up 1.6 percent for the month in the Midwest and are 0.8 percent above the year-ago level; sales gained 8.3 percent for the month in the West but are 0.8 percent below the July 2018 rate; and sales increased 1.8 percent in the South, putting that region’s sales rate 2.7 percent above the year-ago pace. Sales declined 2.9 percent in the Northeast, putting sales 4.3 percent below year-ago levels.

Sales in the market for existing single-family homes, which account for just under 90 percent of total existing-home sales, rose 2.8 percent in July, coming in at a 4.84 million seasonally adjusted annual rate (see chart). From a year ago, sales are up 1.0 percent. Sales were up across three of the four regions: sales gained 8.3 percent in the West to 1.04 million from 960,000 in the prior month; sales increased 1.5 percent in the South to 2.03 million; and the Midwest posted a 1.7 percent gain. The Northeast was unchanged for the second month in a row, posting a 570,000 rate for the third month in a row and the seventh time in the past 11 months.

Total inventory of existing single-family homes for sale declined 1.8 percent to 1.67 million in July, leaving the months’ supply (inventory times 12 divided by the annual selling rate) at 4.1 versus 4.3 in the prior month. However, that is still well above the recent low of 3.1 months’ supply in December 2017. The rise in months’ supply has brought the figure back from ultra-low levels of late 2017 to the range that prevailed during the early 2000s (see chart).

Rising home prices continue weighing on housing activity. Sales are unlikely to move significantly higher in the coming months, and new-home construction is unlikely to contribute significantly to growth in gross domestic product in coming quarters. Still, the economy overall continues to grow, supported by a tight labor market, rising incomes, and strong balance sheets. The main risks on the horizon are fallout from erratic polices (trade, immigration, fiscal, and monetary), escalating trade wars, and ballooning federal deficits. Extreme uncertainty can impact business and consumer confidence and may begin to restrain economic growth.

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Robert Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.