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Existing Home Sales Decline Again, But the Big Bust Starts Next Month

Existing home sales were worse than expected for the second month in March. Mortgage rates will take a big bite looking ahead.
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Existing home sales from the NAR, chart courtesy of Trading Economics

Existing home sales from the NAR, chart courtesy of Trading Economics

The National Association of Realtors (NAR) reports Existing Home Sales Slip 2.7% in March

Key Highlights 

  • Existing-home sales fell for the second straight month in March to a seasonally adjusted annual rate of 5.77 million. Sales were down 2.7% from the prior month and 4.5% from a year ago.
  • With slower demand, the inventory of unsold existing homes increased to 950,000 as of the end of March. That would support 2.0 months at the monthly sales pace.
  • The median existing-home sales price rose to $375,300, up 15% from one year ago.
  • Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and down 9.5% from one year ago (1.05 million). 
  • Unsold inventory sits at a 2.0-month supply at the present sales pace, up from 1.7 months in February and down from 2.1 months in March 2021.
  • The median existing-home price for all housing types in March was $375,300, up 15.0% from March 2021 ($326,300), as prices rose in each region. This marks 121 consecutive months of year-over-year increases, the longest-running streak on record.
  • Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in March, down from 19% in February but up from 15% in March 2021. 
  • All-cash sales accounted for 28% of transactions in March, up from both the 25% recorded in February and from 23% in March 2021.
  • Cash sales made up a larger fraction of transactions, climbing to the highest share since 2014.

Goldilocks NAR View

  • "The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power," said Lawrence Yun, NAR's chief economist. "Still, homes are selling rapidly, and home price gains remain in the double-digits."
  • With mortgage rates expected to rise further, Yun predicts transactions to contract by 10% this year, for home prices to readjust, and for gains to grow around 5%.

Gains Around 5%? Contractions Only 10%

That's the goldilocks view. It does not factor in a hard landing recession that is now baked in the cake.

Existing home sales are already down 4.5% from a year ago and the big bust hasn't even started yet.

30-year mortgage rates are now 5.35% and rising, 

Note that existing home sales are recorded at closing, new home sales are announced at signing. Thus, existing home sales for March reflect purchases made in February or perhaps even January.

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Mortgage Rates

30-year mortgage rates courtesy of Mortgage News Daily (MND)

30-year mortgage rates courtesy of Mortgage News Daily (MND)

The MND rate for a 30-year mortgage jumped again today to 5.30%. The MND series only dates to 2009. This is their highest recorded average rate. One has to go back to November of 2008 to find a Freddie Mac rate this high.

Looking Ahead

Few can afford these rates. Prices will come down. There will be no price gains on houses in 2022.

A recession and hard landing is on the way. What will it look like?

For discussion, please see Forget About a Soft Landing, What's the Shape of the Hard Landing?

This post originated at MishTalk.Com.

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