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Median existing home price rises to $184,300

The median existing home price rose by 11.2% year-over-year to reach $184,300

Existing home sales are reported by the National Association of Realtors once a month. The seasonally adjusted number reports completed transactions in single-family homes, condominiums, townhomes, and co-ops. The report includes such data points as existing home sales, inventory of houses for sale, median house price, mortgage rates, and median time on market. It is a good snapshot of the market that analysts and real estate professionals use.

Restricted supply has been the theme of the U.S. housing market over the past year

At the end of March, there were 1.9 million existing homes for sale, representing a 4.7 month supply. The median time a new home has been on the market has now shrunk to 62 days. As professional investors have become major players in the real estate market, we are seeing tremendous demand for rental properties, which is crowding out the first time home buyer. For all of the fears that a deluge of properties would hit the market and drive down prices, the opposite problem has happened.

Prices are beginning to rise

The median sale price for an existing home is now $184,300, which is up 11.8% year-over-year. This marks the 13th consecutive month of year-over-year price increase. Housing inventory of only 4.7 months signals a market tilted more towards sellers – a six month inventory typically means balance. Last year at this time, there was approximately 6.2 months worth of supply. There is definitely more demand than supply in the market, and some hot markets, like San Francisco and Phoenix, are experiencing bidding wars like we used to see in 2006.

Home builder earnings ahead

Lennar and KB Homes have November fiscal years, so they reported first quarter numbers recently; their reports should give indications for how the rest of the home builders should perform when they announce earnings this month. Lennar (LEN) reported better than expected earnings on March 20th and characterized the market as having strong demand and limited inventory. Backlog was up 82% and orders were up 34%. KB Homes (KBH) also reported strong increases in backlog and orders. NVR reported this morning and its earnings were disappointing, with orders up 11.2% and backlog up 27%.

The Homebuilder ETF (XHB) is up 43% over the past 12 months, but we are still very, very early in the housing recovery. The first time home buyer has been absent due to tough credit conditions and a difficult labor market. As those circumstances change, a lot of pent-up demand will be released, which should drive homebuilder earnings for quite some time. That said, the housing starts data from last week indicated that the focus has been multi-family, not single-family. While building permits did signal more of a focus to single family, they fell in March. The behavior of NVR after its report signals caution for the builders.