With all the talk and print about where we are in this current 10-year housing cycle, home prices and delinquencies have returned to pre-crisis levels. What hasn’t returned to pre-crisis levels is the number of home sales when one calculates BOTH the number of sales AND the number of households.
Sales levels of both existing and newly constructed homes in 2002 (before the beginning of the housing boom) and 2017 are nearly comparable. BUT looking at just sales levels IGNORES the growth in the number of households from 2002 to 2017.
There are now approximately 15 million more households now than there were in the early 2000’s.
One would assume that having more households would imply having a higher level of home sales in order to meet a higher demand for houses. right? Just calculate the total number of single-family home sales by dividing the number of sales by the number of households and you’ll get the percentage of sales turnovers on those homes.
Before the boom and crash years, 2000 – 2003, the turnover rate of home sales was 5.8%. During the crash, the turnover rate of home sales in 2009 dropped to approximately 4%. During 2016 – 2018, a time when houses seemed to sell themselves and agents were feeling like rock stars, the turnover rate of home sales flattened to 5.1%.
How does today’s flattened turnover rate of 5.1% translate into the early 2000’s and a turnover rate of 5.8%? It translates into one million (1M) FEWER home sales each year.
In all these so-called “boom years” from 2012 to the first half of 2018, the turnover rate of home sales has NOT been above 5.1%.
Looking at the data compiled by CoreLogic and gleaned from the US Census Department, Fannie Mae, Freddie Mac and the Mortgage Bankers Association, it appears that selling one million (1M) fewer homes per year is the new normal.