Northeast Hints at Tax Weakness
Existing Home Sales (December)
EHS fell 3.6% M/M to 5.57 million in December. For full year 2017 they registered a modest annual gain of 1.1%, making it the strongest year for home sales since 2006.
- Tax plan effects may be emerging. December sales occurred during the back and forth of the tax plan debate. Sales in the Northeast fell 7.5% M/M. This region is the most sensitive to the tax plan changes and may be exhibiting tax-related weakness, though a trend would need to be established for confirmation.
- Buyers continue to face a market with limited choices. Under 2 million homes have been available for sale since October 2016, and December’s 1.48 million homes for sale represent just 3.2 months’ worth of inventory. Rising rates and the tax plan could further reduce inventory in 2018 as current homeowners face disincentives for moving.
- Price rises reflect the lack of inventory. Buyer competition is pushing up the median price which rose 5.8% Y/Y to $246,800. Historically, tight inventory in the existing markets incents a higher level of housing starts than we are seeing in the marketplace. Thus, we expect prices to remain firm and are optimistic that markets are not exhibiting bubble characteristics despite the strong price growth.