February 2014 Existing Home Sales Are Far From Good

The headlines for existing home sales say that sales growth fell in February month-over-month – and declined year-over-year. Our analysis agrees. The three month rolling averages are continuing to decline demonstrating how soft the data is.

Econintersect Analysis:

• Sales growth decelerated 3.5% month-over-month, down 6.9% year-over-year – sales growth rate trend is decelerating using the 3 month moving average.
• Prices growth decelerated 1.0% month-over-month, Up 7.4% year-over-year – price growth rate trend is accelerating marginally using the 3 month moving average.
• The homes for sale inventory grew marginally this month, and is historically low for Februarys (but higher than inventory levels one year ago).

NAR reported:

• Sales down 0.4% month-over-month, down 7.1% year-over-year.
• Prices up 9.1% year-over-year
• The market expected annualized sales volumes of 4.45 to 4.75 million (consensus 4.60) vs the 4.60 million reported.

November 2013 ended 28 straight months of improving year-over-year home sales volumes (unadjusted data) – and the data this month continued the data deterioration.

Unadjusted Year-over-Year Change in Existing Home Sales Volumes (blue line) – 3 Month Rolling Average (red line)

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The graph below presents unadjusted home sales volumes.

Unadjusted Monthly Home Sales Volumes

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Here are the headline words from the NAR analysts:

Lawrence Yun, NAR chief economist, said conditions in February were largely unchanged from January. “We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago,” he said. “Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said student debt appears to be a factor in the weak level of first-time buyers. “The biggest problems for first-time buyers are tight credit and limited inventory in the lower price ranges,” he said. “However, 20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. In our recent consumer survey, 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle.”