The last two weeks of each month is when most of the US housing statistics are released. Next week housing starts will come out on Tuesday September 20th and existing homes sales will be released on Wednesday September 21st. Along with the S&P/Case-Shiller Home Prices Indices, these data have painted a dreary picture for the US housing market over the past three years.
The chart below tells the story from the existing homes sales perspective. After the 1991 recession, existing home sales grew fairly steadily from a 2.6 million seasonally-adjusted annual rate to about 6.3 million in the middle of 2005; and the inventory of homes to sell (as measured by months’ supply) reached their lowest level in more than 20 years, indicating it would take only four months or so to work off the supply of houses then on the market. Once the housing bubble burst both statistics reversed course quickly and dramatically. Within a relatively short three-year time period existing homes sales had fallen to about 4.0 million and the supply had risen to about 10.5 months.
In early 2009, as the homebuyers’ tax incentives were beginning to stimulate demand we saw homes sales start to creep back up and inventories fall. However, as all housing statistics have now shown, these increases reversed as soon as the incentives had run their course. While there is monthly volatility in these data, from late 2009 through July 2011 the general trend has been for existing home sales to be falling and months’ supply to be increasing. With July’s data existing home sales were back down to a 4.0 million annual rate and the supply was 8.9 months.
The S&P/Case-Shiller Sales Pairs data show a similar slowdown in closed transactions. For our indices, data are collected on sales of specific single-family homes or condos. When a home is resold, months or years later, the new sale price is matched to the first price creating a sale pair.
As with existing home sales, the chart below shows that transactions have slowed down markedly over the past three years. While these data are volatile, it is simply an indication that the housing market behaves with a distinct seasonal pattern. For both the 10- and 20-City Composites, sales volume peak around August of each year (the high points of each line, each year) and are at their lowest around February (the low points). While losing none of the seasonality, you can see the down shift in the peaks and valleys in the data beginning in 2008. For the 20-City Composite, sales pairs peaked at no more than 100,000 each August since 2008 and the floors are closer to 60,000; for the 10-City Composite we see 55,000 and 30,000, respectively. In all cases, well below any other years since 2000.