Residential Real Estate Market Overview: September 2017 Data 2017 Mark A. Melikian Chief Valuation Officer mark.melikian@summitvaluations.com 2800 River Road, Suite 460 The following is a market data summary of existing homes, housing starts, employment rates and interest rates as reported by the National Association of Realtors, the U.S. Census Bureau, the U.S. Department of Labor and Freddie Mac, respectively. This report analyzes the real estate market nationwide. Real estate markets are localized and many individual markets will behave differently from national trends. SEPTEMBER 2017 SUMMARY: In September 2017, the following increased year over year: The median sales price and housing starts. In September 2017, the following decreased year over year: The seasonally adjusted number of homes sold, the month supply of existing homes, the unemployment rate and mortgage interest rates. On a regional level, the South had the highest number of existing home sales and the West had the highest median price. The Midwest and West experienced a month over month increase in the number of seasonally adjusted existing home sales while the South saw a month over month decrease and the Northeast was unchanged. All four regions experienced a decrease in the median sales price month over month with the Northeast leading the way at negative 3.9% (see Figures 8 and 9). Report Highlights: Housing Starts See commentary on page 11 Page 1 of 11
Market Overview: The median sales price of existing homes in September 2017 was $245,100. In August 2017, the revised median sales price was $253,100 and in September 2016 the median sales price was $235,200. This month s median sales price decreased month over month by 3.2%, yet increased year over year by 4.2% (see Figure 1). $270,000 $260,000 $250,000 $240,000 $230,000 $220,000 $210,000 $200,000 Median Sales Price of Existing Homes Figure 1 Source: NAR Page 2 of 11
Market Overview: The seasonally adjusted annual number of existing homes sold in September 2017 was 5,390,000. In August 2017, the revised number was 5,350,000 and in September 2016, it was 5,470,000. September s annual number of existing homes sold decreased 1.5% month over month and increased.7% year over year (see Figure 2). 5,800,000 5,700,000 5,600,000 5,500,000 5,400,000 5,300,000 5,200,000 5,100,000 Number of Existing Homes Sold Annually: Seasonally Adjusted Figure 2 Source: NAR Page 3 of 11
Market Overview: In a normal real estate market, there is typically a 3 to 6 month supply of housing inventory. The month supply of existing homes for sale in the U.S. was 4.2 in September 2017. In August 2017, the revised figure was 4.2 months and in September 2016, the month supply was 4.5. The month over month supply was unchanged, and the year over year decrease was 6.7% (see Figure 3). 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Month Supply of Existing Homes Listed for Sale Figure 3 Source: NAR Page 4 of 11
Market Overview: Housing starts (new home construction) averaged 1.51 million annually between 1950 and 2000. From 2001 to 2006, during the formation of the housing bubble, average annual housing starts jumped to 1.8 million units. However, annual housing starts averaged only 870,000 units from 2007 to 2016, leaving a housing shortage as evidenced by the current levels of inventory There will need to be several years of above-average housing starts, realistically anywhere from 1.6 to 1.7 million units, to increase inventory levels and establish a more balanced market. Anything below 1.5 million will likely result in a continued housing shortage, exacerbating the affordability crisis in some markets. In September 2017 the annualized housing starts were 1,127,000. In August 2017 the revised number of housing starts was 1,183,000 and in September 2016 is was 1,062,000. The month over month decrease was 4.7% while the year over year increase was 6.1%. 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Annualized Housing Starts: Seasonally Adjusted Figure 4 Source: U.S. Census Bureau Page 5 of 11
Market Overview: The U.S. Department of Labor summarizes the National Unemployment Rate as follows: People with jobs are employed. People who are jobless, looking for a job, and available for work are unemployed. The labor force is made up of the employed and the unemployed. People who are employed, or unemployed and not seeking work, are not considered in the unemployment rate. Therefore, when someone gives up seeking work, they will not be included in these statistics. The unemployment rate among people seeking work in September 2017 was 4.2%. In August 2017, the rate was 4.4% and in September 2016 the U.S. unemployment rate was 5%. The month over month unemployment rate decreased 4.5% and the year over year unemployment rate decreased 16% (see Figure 5). 5.2 5 4.8 4.6 4.4 4.2 4 3.8 National Unemployment Rate Figure 5 Source: US Dept. of Labor Page 6 of 11
Market Overview: Freddie Mac reports the interest rate on a 30-year fixed rate mortgage in September 2017 was 3.81%. In August 2017, the rate was 3.88% and in September 2016 the 30-year mortgage rate was 3.46%, which is an increase of 35 basis points year over year (see Figure 6). 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 30-Year Fixed Mortgage Rates Figure 6 Source: Freddie Mac Page 7 of 11
Existing-Home Sales Regions Figure 7 Source: NAR Page 8 of 11
Market Overview: Of the 5,390,000 seasonally adjusted number of homes sold in September 2017 (see Figure 2), the regional breakdown is as follows (with percentage increase or decrease over last month): Northeast 720,000 (unchanged) Midwest 1,300,000 (+ 1.6%) South 2,130,000 (-.9%) West 1,240,000 (+ 3.3%) Existing Home Sales Seasonally Adjusted Annual Rate by Region: September 2017 2,130,000 1,300,000 1,240,000 720,000 Northeast Midwest South West Figure 8 Source: NAR Page 9 of 11
Market Overview: The September 2017 median sales price by region is as follows (with percentage increase or decrease over last month): Northeast $274,100 (- 3.9%) Midwest $195,800 (- 2.9%) South $215,100 (- 2.6%) West $362,700 (- 3.3%) Median Sales Price Existing Homes by Region: September 2017 $362,700 $274,100 $195,800 $215,100 Northeast Midwest South West Figure 9 Source: NAR Page 10 of 11
Housing Starts: Beginning with this month s report, the Seasonally Adjusted Annualized Housing Starts by the U. S. Bureau of the Census will replace the Pending Home Sales Index. The reason for the change is twofold: New home construction plays a key role in our housing supply, and the persistent housing shortage is cited in most discussions of housing inventory levels. As noted in our November 2016 report, an increase in new home building is one way to elevate the supply of forsale housing and help balance the market. Per the U. S. Bureau of the Census, 1,125,000 new households were formed on average annually over the past ten years. There was also an annual average of 350,000 uninhabitable homes demolished during that same time. Together, these factors resulted in the need for new home construction of nearly 1.5 million units per year to keep pace. This aligned nicely with the 1.51 million average annual housing starts that occurred from 1950 to 2000. From 2001 to 2006, during the formation of the housing bubble, average annual housing starts jumped to 1.8 million units. However, annual housing starts averaged only 870,000 units from 2007 to 2016, leaving a housing shortage as evidenced by the current levels of inventory (see figure 3). Moving forward, there will need to be several years of above-average housing starts, realistically anywhere from 1.6 to 1.7 million units, to increase inventory levels and establish a more balanced market. Assuming the number of new households created, and the rate of homes being demolished remains steady, any number of annual new housing starts below 1.5 million will result in a continued housing shortage. There has been approximately 1.2 million housing starts over the past 12 months (see figure 4). Unless inventory is increased through the introduction of new housing units, an affordability crisis in some markets may well extend over the next several years. Future reports will track the seasonally adjusted, annualized number of housing starts monthly. Page 11 of 11