On a national basis, existing home inventory in October decreased by 60,000 units or 3.2% month on month, (m/m) to 1.800 million, (M). On a year on year, (y/y) comparison, inventory of existing homes fell 10.4%. Month’s supply of existing homes was 3.9, its lowest level since May. New home inventory stood at 282,000 units, up 1.4% m/m and stronger by 32,000 homes or 12.8% y/y. Month’s supply of new homes was at 4.9 months, down 0.3 of a month m/m.
The Commerce Department reported that new home sales increased 6.2% to a seasonally adjusted annual rate, (SAAR) of 685,000 units last month. That was the highest level since October 2007 up from September’s sales pace of 645,000 units. New home sales have now increased for three straight months. Total existing-home sales increased 2.0% to a SAAR of 5.48M in October from a downwardly revised 5.37M in September. After last month’s increase, sales are at their strongest pace since March’s (5.70M), but still remain 0.9% below a year ago.
Sales were strongest in the South at a SAAR of 2.16M, up 1.9% m/m and down 1.8% y/y. Sales in the Midwest topped 1.31M, up 0.8% m/m and down 1.5% y/y. The West at 1.27M saw SAAR sales rise 2.4% m/m and +0.8% y/y, while SAAR sales in the Northeast were 740,000, a gain of 4.2% m/m, flat y/y.
Figure 1 shows inventory of new and existing houses from 2009 to present. Inventory at 3.9 months is now lower than at any point as far back as our data goes, (2004).
Figure 2 presents Case-Shuler home price index, from 2005 to present in both SAAR and seasonally adjusted, (SA) configurations. Prices are quickly approaching the 2006 peak.
The median existing-home price for all housing types in October was $288,400, up 4.7% from $275,500 in October 2016. October’s price increase marks the 68th straight month of y/y gains. Low inventory level, coupled with low interest rates and strong employment gains cause rising prices which should accelerate new home construction going forward. Figure 3 illustrates the price of existing homes with the price of new homes. New homes are quite a bit more expensive than existing homes keeping first time buyers at bay.
Foreclosure activity is approaching historic lows. There are currently 585,945 properties in U.S. that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on Realtytrac is 870,039. The top five state for Foreclosure activity include: New Jersey, (1 in every 559), Delaware, (1 in every 800), Maryland, (1 in every 970), Illinois, (1 in every 998) and Nevada, (1 in every 1,256). South Dakota has the distinction of having the lowest foreclosure rate of one in every 20,316.
At Gerdau, we monitor the US housing market because historically new home construction has preceded non-residential construction (NRC), and therefore is an excellent barometer to foresee future demand for NRC.