Home Sales Drop

The gains in home sales seen in March evaporated in April. Sales of new homes fell 1.5% in the month to an annual rate of 662,000 units, and sales of existing homes experienced an even larger drop — 2.5% — to 5.46 million units, annualized.

Moreover, the blue line in the chart below reveals that sales of existing homes have not gained ground in the last 12 months. In fact, the sales rate for the first four months of this year is running 2% below the same period last year.

In contrast, new homes sales have improved since early 2017. Through April 2018, new homes sales are running at an annual rate of 657,000 units, which is 7% above last year.

But for the month of April, home prices moved in different directions. The median sale price of a new home fell nearly 7% last month, to $312,000. In contrast, the median price of an existing home rose to $297,300, up 3.3% from March.

Relatively, perhaps because of the drop in prices, sales of new homes each year have exceeded the prior year’s sales. This is illustrated in the chart below, which shows the “actual” monthly sales since 2014. The line representing each consecutive year is above those of prior years, for virtually every month. Note that the chart reflects actual units sold each month, rather than the adjusted annual rates discussed above and shown in the previous chart.

We can see that so far this year — indicated by the red line at the top — sales for each month is the highest of any prior year. This trend bodes well for the market, at least for the rest of 2018.

Existing-home sales declined in three of the four U.S. regions. The exception was the Midwest, where sales remained unchanged from March. But new-home sales declined only in one of the regions, the West.

Manufacturing Shipments Remain Robust

Manufacturers’ shipments of durable goods took a slight breather in April, dipping by a nearly negligible 0.1% to $246.7 billion. This is a modest setback after eight consecutive months of increases.

These April shipments, however, were 7% higher than the same month a year ago. Year-to-date through April, durable-goods shipments reached $982 billion, up 6.6% over last year.

About one-third of durable goods manufacturing is made up by “Transportation Equipment.” That includes high-cost items like automobiles, aircraft and ships, which impact the total volume significantly.

Mortgage Rates Rise

Mortgage rates resumed their rise. The 30-year fixed rate, one of the key economic indicators, rose by another five basis points last week (0.05%) to 4.66%. The rate has not been this high for more than seven years, since January 2011.

Manuel Gutierrez, Consulting Economist to NKBA 

Explanation of NKBA’s Economic Indicators Dashboard

The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal, indicating that the latest value is improving; “Yellow,” as it’s commonly understood, denotes caution because the variable may be changing direction; “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.

Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.

Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.

Single-Family Starts.  This is the number of single-family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.

Existing-Home Sales. These data are issued monthly by the National Association of Realtors and capture the number of existing homes that were sold in the previous month.

High-End Home Sales. This series are sales of new homes priced at $750,000 and higher. The data are released quarterly by the U.S. Department of Commerce and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.

Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.

Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.

Building-Materials Sales. These data, released monthly by the Department of Commerce, capture total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.

Appliance-Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as home centers, for instance.

We hope you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.