There is a wealth of information available about residential real estate markets in the U.S. and Canada. With home starts in the two countries now taking divergent paths – trending upwards to the south and downwards to the north – this is a good time to review some the latest data.
U.S. new single-family home sales in March, at 417,000 units seasonally adjusted and annualized (SAAR), were +1.5% on a month-to-month basis and +18.5% year over year, according to a joint press release from the Census Bureau and the Department of Housing and Urban Development.
The number of unsold single-family units increased from 150,000 in February to 153,000 in the latest month. As a result, the number-of-months inventory – which divides unsold units by the current monthly sales rate – remained the same at 4.4.
The number-of-months inventory figure reached as high as 12.2 months in January, 2009. Since then, with the exception of a spike after April 2010 when a tax incentive expired, the stockpile figure has been falling in steady stages until reaching a low of 4.0 in January of this year.
What about the existing homes market in the U.S.? According to the National Association of Realtors (NAR), resale activity encompassing singles, townhouses, condos and co-ops was 4.92 million units SAAR (i.e., just below 5.0 million) in March, a decline of 0.6% from February but an increase of 10.3% versus March 2012.
In its press release, the NAR says a tight inventory of available properties is restricting sales volume at this time. Many potential home sellers are waiting for further price improvements. There’ll be more on the subject of house prices several paragraphs down.
The number-of-months inventory of resales is currently 4.7 months. A year ago, there was a 6.2-months build-up of existing homes for sale.
The NAR’s report highlights two key indicators of an improving real estate market. The prevalence of multiple bids has picked up noticeably. And more transactions are being finalized above the asking price.
The median time from listing to selling for all homes has dropped to 62 days versus 74 in February. At the same time last year, homeowners had to endure a median wait time of 91 days before divesting their property.
The percentage of total resales involving foreclosures and “short sales” (i.e., an agreement between owner and mortgage holder to sell ahead of foreclosure) was 21% in March 2013, down from 25% in February and 29% in March of 2012.
First-time homebuyers accounted for 30% of all existing home purchases in March.
In Canada, existing home sales are monitored by the Canadian Real Estate Association (CREA). March 2013’s level of resale activity was 15.3% below the same month a year ago.
Also in March, according to CREA, the number-of-months inventory of homes for sale nationally in Canada was 6.5, down from 6.7 in February.
How are prices stacking up according to the various publicly available data sources?
The U.S. Census Bureau, in partnership with the Department of Housing and Urban Development, says the median sales price – i.e., that point at which half the transactions took place at a higher value and half at a lower amount – of single-family new homes sold in the U.S. in March was $247,000. The average sales price was $279,900.
The median price is the benchmark usually adopted since the “average” is biased upwards by luxury homes in the highest price range.
In the U.S. existing homes market, the NAR has calculated that March’s median price was $184,300, with the West being most expensive ($258,100) and the Northeast not far behind ($237,000).
Resale homes were cheapest in the Midwest ($141,800), while the South ($161,700) also offered “bargain” accommodation.
The NAR also estimates that homes subject to foreclosure have recently been selling at a 15% discount to market value.
On the important subject of percentage change, the NAR says existing home prices are up 11.8% when compared with March 2012. The latest year-over-year percentage increase is the strongest since November 2005 (+12.9%).
There have been 13 consecutive months of year-over-year prices increases in the resale market, according to NAR. The last time there was such a long string of positive gains occurred between May 2005 and May 2006.
Regionally, the year-over-year percentage changes in median resale home prices have been led by the West (+26.1%), followed by the South (+10.4%) and Midwest (+7.8%). The improvement in the Northeast (+3.0%) has been tentative.
The resale housing price index of the Federal Housing Finance Agency (FHFA) – which looks at only those properties with mortgages owned or guaranteed by Fannie Mae and Freddie Mac – recorded a 0.7% increase in February (the latest month for which data is available) versus January and a 7.1% gain when compared with February of last year.
As a reality check, the FHFA’s press release points out that its index still remains 13.6% below its April 2007 peak.
The FHFA data is available according to seven geographic divisions. The fastest year-over-year price increases are occurring in the Pacific Region (comprised of Hawaii, Alaska, Washington, Oregon and California), +15.3%.
In Canada, new home prices were +0.2% month to month (SAAR) and +2.1% year over year in March, according to Statistics Canada. As calculated by CREA, existing home prices were ahead by +2.5% on an annual basis.
North of the border, new home construction is on a gentle slide downward, accompanied by worries that the angle of descent may grow steeper. In America, now home starts are picking up nicely, finally bettering the elusive one-million-unit mark in the latest month.
As a result, U.S. media attention is beginning to focus on increasing construction costs in the homebuilding sector across the border. The price of lumber has skyrocketed and many providers of other materials are seizing the opportunity presented by the demand versus supply mismatch.
That’s the material side. As for the skilled labor required to build single-family and high-rise residential projects, availability was depleted in the long painful period of decline in U.S. housing starts from 2006 through 2009.
Furthermore, various measures to reduce the undocumented worker population in the U.S. are now hitting the market with a double whammy.
Not only is the reversal in the illegal immigrant population taking away from overall housing demand. It’s also one of the causes of the worker shortage at construction job sites.