by Mish
Data was so bad the National Association of Real Estate cheerleaders showed concern.
The Bloomberg Econoday Consensus was for 5.305 million sales at a seasonally adjusted annualized rate in a range of 5.200 million to 5.550 million sales. The headline number came in at 5/080 million.
Highlights
Housing demand continues to soften with existing home sales down a surprising 7.1 percent in February to a 5.080 million annualized rate. This is much lower than expected and well below Econoday’s low estimate for 5.200 million and is the second lowest rate since February last year. The report is weak throughout with single-family sales down 7.2 percent, at 4.510 million, and condos down 6.6 percent at 570,000. All regions show declines in the month.
Another month of price concession did not boost sales with the median down 1.4 percent at $210,800 for the lowest reading since, once again, February last year. Year-on-year, the median is up 4.4 percent which is above the year-on-year sales rate of plus 2.2 percent, an imbalance that hints at further price concessions ahead.
One factor holding down sales, and which reflects the low price levels, has been a lack of available homes on the market which, however, moved 3.3 percent higher in the month to 1.880 million. But this is still down 1.1 percent year-on-year. Supply relative to sales, given the drop in sales and the rise in supply, rose to 4.4 months from 4.0 months. This, however, is still very low and compares with 4.6 months this time last year.
The weakness in this report, described as “meaningful” by the usually upbeat National Association of Realtors, is substantial and, like last week’s drop in housing permits, represents a downgrade for housing, a sector that was supposed to be a leader of the 2016 economy. New home sales will be posted on Wednesday.
Recent History
Existing home sales have been solid but haven’t been accelerating, basically holding at a mid-to-low 5 million unit annual rate for the last year. In one sign of strength, single-home sales have been accelerating relative to condo sales which hints at strength for household wealth. Prices have been rising but less so than sales which points to discounting. And prices haven’t been high enough to bring homes into the market as available supply remains very low. Forecasters see existing home sales coming in at a 5.305 million annualized rate in February, down noticeably from January’s 5.470 million.
Let’s investigate the claim of “solid but not accelerating” home sales.
Solid Sales?
Averaging things outs, we clearly see sales accelerated from February of 2015 through June of 2015. Since then, sales have decelerated.
Mortgage Rule Bounce Over
The sudden plunge in November sales (released December) was due to change in disclosure rules called “Know Before You Owe“.
The bounce in December and January sales was most likely due to delayed closings in November and December. That bounce is now over.
“Know Before You Owe” kinks have been worked out.
The “surprise” downtrend continues.
Mike “Mish” Shedlock
