there were few important monthly releases this past week, as is typical for the 2nd last week of each month; however, we did see the release of both of the widely watched reports on home sales; that on Existing-Home Sales from the National Association of Realtors and on New Single Family Home Sales from the Census Bureau..

  the NAR reported that existing home sales “spiked” in July, increasing at a seasonally adjusted 6.5% rate to an annual sales rate of 5.39 million homes, up from a 5.06 million pace in June, which was originally reported at 5.08 millionJuly’s sales were 17.2% higher than the 4.60 million-unit rate of a year earlier and at the highest seasonally adjusted pace since November 2009, when the first time homebuyer tax credits boosted existing home sales…unadjusted data showed preliminary July sales at 519,000 homes, up from the revised 500,000 sold in June, and up 20.7% from the 430,000 homes sold in July of 2012…since homes closed in July were likely contracted for in May, just as interest rates were beginning to rise, the prospect of even higher rates going forward likely provided an incentive for many to close sooner rather than later…

July existing homes by price range

  the national median selling price for all homes sold in July was $213,500, down 0.2% from the $214,000 median price realized in June, but up 13.7% from the median price of $187,800 in July of 2012, and just 7.3% below the NAR peak median of $230,400 in 2006….this was the 8th consecutive month of double digit year over year median home price increases and the 17th consecutive month of increasing median prices overall, a run only matched by the January 2005 to May 2006 period…the average home price realized in July was $260,100, up a bit from $260,000 in June and 10.2% above the average home price of $236,100 in July of last year…prices west of the Rockies continued to rise; the median sales price in the West was $287,500, up 19.2% from a year earlier, while the average sales price was $329,700, 14.2% higher than last July…nationally, the median price for a single family home in July was $214,000, down 0.3% from $214,000 in June, but up 13.5% from a year earlier, while the average price for a single family home was at $260,600, down from $261,500 in June but 10.0% higher than the $237,000 average of last July…2.28 million previously owned homes remained on the market at the end of July, up from 2.19 million in June, which the NAR calculates to be a 5.1 month supply at the current sales pace; that’s still 5% below year ago figures, and the NAR blames these tight inventories of available homes for above-normal price growth in some areas..

the pie graph to the above right, from the NAR, shows the percentage of those homes sold in July in each of several price ranges; only 15% of homes sold for less than $100,000, represented by the turquoise wedge in the upper right of the pie, while another 44%, represented by the large purple wedge, sold for between $100,000 and $250,000, and 29% more sold for between $250,000 and $500,000…thus, 12% of homes sold for over a half million, with 2% of the total selling for over a million each…below, we have an NAR bar graph that shows the year over year percentage change in the number of homes sold in each of those price brackets; since those homes selling for under $100,000 is the only range to see a decline, and all three price ranges over a half million saw increases of over 44%, it’s clear most of what is driving the year over year price increases is a change in the mix of homes sold…  

July existing homes vs year ago price

a factor contributing to the changing mix was that distressed home sales, which sell at a discount, only accounted for 15% of July sales, down from 24% of sales a year earlier…foreclosures accounted for 9% of sales and sold for 16% less than similar unencumbered homes. while short sales accounted for 6% of sales and sold at a 12% discount…another element in the mix is that new purchases by investors slumped to 16% of total sales in July, down from 17% in June and down from a peak of 22% of all sales earlier this year…first time home buyers arent participating as they normally would; they still just accounted for 29% of sales in July, down from 34% a year ago, while the NAR reports all-cash transactions continue to account for 31% of sales, same as June, and up from 24% a year ago…the percentage may even be higher than the realtors report; an analysis last week by economists at Goldman put the all cash figure at over 50%, with only 44 cents of every home purchase dollar currently being financed, compared to 67% before the crisis.

not too surprisingly, there’s quite a bit of regional and metro variability in these metrics; housing economist Tom Lawler has a monthly table showing cash sales, short sales, & foreclosures for selected cities which he’s been adding more cities to monthly; he shows 70.0% of Florida townhomes & condos that sold in July exchanging hands for cash, with a high of 75.5% cash sales in the Miami area, compared to 15.9% in Omaha and 16.1% in the mid-Atlantic region; Las Vegas shows the highest distressed sales percentage in July at 36.0%; a year earlier, more than half the home sales in Las Vegas, Reno, Sacramento and Orlando were either foreclosures or short sales…

Graph: New Homes Sold in the United States

in contrast to the “spike” in July sales of existing homes, the Census report on July New Single Family Home Sales (pdf) indicated a sharp decline in contracts to purchase new homes; Census estimated that sales of new single-family homes in July were at a seasonally adjusted annual rate of 394,000, “13.4 percent (±14.5%)* below the revised June rate of 455,000; which you’ll recall means that it’s 90% likely that the July sales change was somewhere between 1.1% greater and 27.9% less than June’s…the given annual rate of 394,000, well below the median Bloomberg forecast of 487,000, was extrapolated from the Census estimate of 35,000 homes sold in July; June’s new home sales, estimated last month at 48,000, or an annual rate of 497,000, have been revised downward to 43,000, while May sales, first estimated at 45,000, then at 43,000, are now revised down to 41,000, and April’s estimated sales, first reported at 46,000 and revised to 44,000 last month, are now given at 43,000; the adjacent ALFRED bar graph shows these the net of this month’s revisions; the blue bars represent unadjusted new homes sales estimates as reported last month for April, May and June, while the red bars show the revisions applied this month, and July’s new sales..revisions of this magnitude – more than 10% in June – should not be a surprise to us, as we’ve previously noted many times, this report typically has the largest margin of error and is subject to the largest revisions of any census construction series…

Distressing Gap

even with the inexact nature of the July data, it seems clear that, combined with the large revisions of previous months, that new home sales have hit an interest rate induced air pocket…unlike existing home sales, which are logged as completed at closing, the Census uses contract signings for its count of new home sales, so the impact of rising interest rates on potential home buyers shows up in this monthly data before it does in the NAR reports…average interest rates for a 30 year fixed rate mortgage were at 3.45% in April, 3.54% in May, 4.07% in June, and 4.37% in July…so while some of June sales may have reflected mortgage rates locked in a month or so earlier, by July higher rates were already well established, or apparently at least enough so to give some potential buyers pause before signing…if that’s the case, the weakness in new home sales should carry into August, as Freddie Mac reported 30 year rates at 4.58% this week, up from 4.40% last week and the highest 30 year mortgage rates in over 2 years

the sudden July divergence between the two home sales metrics is obvious in the above graph from Bill McBride, which shows existing home sales monthly up in July tracked in blue, and new home sales, also annualized, tracked in red and clearly down, with the sales count for those on the right margin…both existing and new home sales had been generally, if erratically, increasing, until July, when closings of older homes spiked up in an apparent attempt to lock in lower rates, while new contract signings on new homes seemed to dry up in the face of higher rates…the McBride chart also shows what Bill calls the “distressing gap” between an allegedly normal relationship between new home sales numbers and sales of existing homes…looking at the graph, it seems a case could be made that there is now a new normal ratio between the two..

with this report, even the direction of the change in year over year new home sales has become uncertain….census reports that July new home sales were6.8 percent (±18.6%)* above the July 2012 estimate of 369,000.”; the asterisk in that headline directs us to an explanatory footnote which says in part “it is uncertain whether there was an increase or decrease” in new homes sold this year compared to last…what that statement means is the best they can guess with the scant data that they have is that there’s a 90% likelihood that new home sales in July were somewhere between 11.8% less and 25.4% more than a year ago; in other words, if July’s seasonally adjusted sales rate was extrapolated over a year, it’s fairly likely we’d see somewhere between 325,458 and 462,726 new homes sold….with this degree of uncertainty, the results of these reports are not something we’d want to hang our policy decisions on

FRED Graph

Census estimates that there were 172,000 new homes for sale at the end of July, which they’ve seasonally adjusted to 171,000 to arrive at a 5.2 month inventory of homes to be sold at the current seasonally adjusted sales rate…obviously, at least a ±14.5% margin of error would have to be applied to that metric as well…of those new homes remaining unsold, an estimated 36,000 were completed, 102,000 were under construction, and 34,000 had not yet seen groundbreaking…the median sales price of new houses sold during July was $257,200, which was down from $258,500 in June, which was revised up from the $249,700 median figure which was reported last month…the average new homes sales price in July was $322,700, up from the $302,200 average sales price in June; also revised up from the average sales price of $295,000 reported last month…a factor in the higher average in July vis a vis the lower median was that 5% of new homes sold in July reportedly sold for over $750,000, while only 3% of sales were in that upper price bracket in June…that the average new home price went up in July while the median price went down can even be seen on our adjacent FRED graph, which shows the average new home prices monthly since January 2004 in red, and the monthly median new home selling price in green over the same period, with the price ranges marked on the right margin…also shown on the same graph in blue is the track of new home sales monthly at a seasonally adjusted annual rate, with the scale for those on the left…

another report released this week we could take a look at was the Regional and State Employment and Unemployment Summary for July from the BLS, which takes the data from the two national employment surveys released at the beginning of the month and breaks it down by state…the same caveats apply to this report as to the national employment summary, ie, the establishment survey has a ±90,000 margin of error on non farm payrolls and is typically revised by an average of 46,000, and the unemployment rates coming out of the household survey have a margin of error of plus or minus 0.2 percentage points, which is why they usually lead these reports with a nebulous statement like “regional state unemployment rates were little changed in July”

  the states showing the largest gains in non farm payrolls in July were California, which added a net 38,100 additional jobs, Georgia, which saw 30,900 added to their payrolls, and Florida, which added 27,600 jobs; 15,000 of the California jobs were in professional and business services, which could be anything from a management consultant to taking out the trash, and 12,100 were in “trade, transport, and utilities” of which jobs in retail were the largest gainer nationally; Georgia’s gains were widespread across all sectors, with 7,200 new jobs in government being an outlier compared to other states…meanwhile, Florida, which lost 6,900 government slots, saw 13,100 added in “trade, transport, and utilities”…other states that saw statistically significant one month job gains included Arizona with 13,700, Michigan with 21,400, Connecticut with 11,500, Delaware with 2,800, Kentucky with 9,500, North Dakota with 2,700, Utah with 10,600, Washington with 8,800, and West Virginia with 6,300…four states, meanwhile, saw statistically significant job losses; those with July job decreases included New Jersey, which shed 11,800 payroll jobs including 5,800 in government, Nevada, where 10,200 job losses were spread across several sectors, Maryland where 9,200 less jobs included 4,300 fewer in government, and New Hampshire, which lost 3,200 payroll positions..

  since July of last year, 33 states saw statistically significant payroll job increases and only Alaska had a small decrease of 1,600 jobs…the map below, from page 20 of the full pdf release, shows the number of jobs added over the previous year as a percentage of total payroll jobs in each state; the unshaded states of Utah, which added 40,500 jobs, and Arizona, which saw payrolls increase by 74,700, saw the largest percentage job gains at over 3.1%, while Washington, Idaho, North Dakota, Colorado, Texas, Mississippi and Georgia all saw non farm payrolls rise by over 2%…meanwhile, those states with the darkest shading below have seen less than a 1.0% increase in payroll jobs…numerically, the largest year over year job increases occurred in Texas at 293,000, California at 236,400 and Florida at 143,700…

July map YoY nonfarm payroll change by state

even though the national unemployment rate fell to 7.4% in July, 28 states and the District of Columbia saw their unemployment rates rise during the month, while only 8 states saw their rate fall; of those states seeing a statistically significant change in the unemployment rate, seven saw increases: Alaska’s unemployment rate climbed from 6.0% to 6.3% and Georgia’s increased from 8.5% to 8.8%, while California, Iowa, Nebraska, Vermont, and Virginia each saw their unemployment rates tick up 0.2%…meanwhile, Mississippi saw a significant decline in its unemployment rate from 9.0% in June to 8.5% in July…the map below, from a BLS table and map supplement, shows the seasonally adjusted unemployment rates by state as of July…all states are now below the 10% threshold; those in red have unemployment rates above 8.0%, led by Nevada at 9.5%, Illinois at 9.2%, Rhode Island and North Carolina, both at 8.9%, and Michigan and Georgia both with 8.8% unemployment rates, while California, New Jersey, Kentucky and Tennessee all have official rates over 8.5%…on the other end of the spectrum, North Dakota at 3.0% and South Dakota with a 3.9% unemployment rate are shown in yellow…over the year, California’s rate has fallen from 10.6% in July a year ago to 8.7%, Nevada is down from 11.3%, Rhode Island is down from 10.5%, and Florida’s unemployment rate fell from 8.7% last July to 7.1% with this report..

July U3 by state map

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)