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Existing Home Sales Skid to Pre-Pandemic Level, a Housing Bust is Underway

May 19, 2022

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5:32 pm

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59 comments

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Economics

The National Association of Realtors reports Existing-Home Sales Retract 2.4% in April

Report Highlights

Existing-home sales fell for the third straight month to a seasonally adjusted annual rate of 5.61 million.
Sales were down 2.4% from the prior month and 5.9% from one year ago.
With slower demand, the inventory of unsold existing homes climbed to 1.03 million by the end of April, or the equivalent of 2.2 months of the monthly sales pace.\
The median existing-home sales price increased at a slower year-over-year pace of 14.8% to $391,200.
All-cash sales accounted for 26% of transactions in April, down from 28% in March and up from the 25% recorded in April 2021.
Individual investors or second-home buyers, who make up many cash sales, purchased 17% of homes in April, down from 18% in March and equal to 17% in April 2021.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.98% in April, up from 4.17% in March. The average commitment rate(link is external) across all of 2021 was 2.96%.

“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” said NAR chief economist Lawrence Yun.

The NAR’s PowerPoint Presentation has many interesting charts worth a review.

Median Price of Existing Home Sales

Percent Change of Existing Home Sales by Price Range

Year-Over-Year Percent Change of Existing Home Sales

Key Chart Ideas

Year-over-year sales are down 9 consecutive months.
Sales of homes over $500,000 are up, below $500,000 down
The median price of sales continues to rise

Econoday Consensus

Amusing Economists

Economists are more than a bit amusing. One predicted a 4 percent rise in sales. What was that person’s thought process?

Prices are still rising (for now).

But with mortgage rates up over two percentage points, this bust is just getting started.

This post originated at MishTalk.Com.

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59 Comments

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Oldest Most Voted

RonJ

4 years ago

“Existing home sale declined for the third month. It’s just a start of what’s coming.”

Per Klaus Schwab, it is just the beginning. The people will own nothing and be happy.

Lisa_Hooker

4 years ago

Reply to RonJ

People you don’t know will own your stuff and they will be happy.

Jackula

4 years ago

Looking at the comments I’m getting a good chuckle. It looks like most here think that things are gonna be different this time to the upside. With the kind of average mortgage interest rates we are gonna see over the next 5 years the market prices will probably be closer to half of what they are today. We probably currently have over 2 billion residential bedrooms with prob around 200 mil being occupied by humans for sleeping. What we have is a housing allocation problem, they’ve been hoarded due to central banks meddling. My opinion for what it is worth.

honestcreditguy

4 years ago

Reply to Jackula

oh yeah, the treasury and fed should have given homes foreclosed to returning vets for pennies on the dollar, they chose PE And hedgies in bulk

Christoball

4 years ago

Many people have not reached their primary residential 2 year occupancy capital gains exemption if they bought less than 2 years ago. More and more properties will enter the market when this occurs. Supply will go up.

Six000mileyear

4 years ago

Reply to Christoball

By that time there may be a loss, and properties will sold because of mortgage delinquencies and defaults.

MPO45

4 years ago

I certainly welcome a housing bust, I would like to buy more rental properties but there are only a few markets that seem reasonably priced to me. CoreLogic has the data for anyone interested in where the “reasonably” or “under” priced real estate is in America. As always, I prefer hard data and analysis.

On the flip side, I went over to trends.google.com to check out trending words: mortgage, loan, insurance and the trend is all down.

https://trends.google.com/trends/explore?geo=US&q=mortgage,loan,insurance

Again, hard data and analysis.

Lisa_Hooker

4 years ago

Reply to MPO45

I went over to trends at google too!

Hope trending down.

Faith trending down.

Optimism trending down.

Confidence trending down.

Expectations trending down.

Certainty trending down.

Trust trending down sharply.

You’re welcome.

JRM

4 years ago

It all depends where you are buying!!!

Prices in S OR have been going down, and many houses/property will end up on Pending and within a week or two are back on the market!

honestcreditguy

4 years ago

Were selling a view home in San Francisco suburbs, I will update on when first day on MLS and when sold. I think we get 100-200K over asking as we are in one of best areas of the city, surrounded by high end homes, we can see the city, ocean and Gg park out of windows at same time. $50 mos hoa with parking and a block down to N judah train. List for 965K……in staging and some touch up for next week or so…

I say gone in 2 weeks. Our realtor is one of best in state, just got 500K over ask on home last 30 days….

Jackula

4 years ago

Reply to honestcreditguy

Yeah, the bay area and SoCal will be close to the last to fall. My mother took a $175 k hit on a house in Boise ID in April she could have got $900 k for in Jan. Waiting tho could be deadly…

Lisa_Hooker

4 years ago

Reply to honestcreditguy

I will be selling some $20 bills for $100.

honestcreditguy

4 years ago

Reply to Lisa_Hooker

good luck, you have to know the market and it seems you might know the sparks nevada market only

Lisa_Hooker

4 years ago

Reply to honestcreditguy

😉

goldguy

4 years ago

Just a thought here…

Thinking back to housing in the last stagflation mess of the 1980 time frame…I do recall interest rates going to the moon, however, prices for housing did not bust…I am sure there was some fluctuation around the country, but I don’t recall anything really radical happening on the housing front…just a thought.

Roadrunner12

4 years ago

Reply to goldguy

Im a little rusty but back in the olden days, house pricing was a lot more stable. It was common place for home buyers to put 20% down and get a better interest rate and also save on CHMC insurance. The lowest downpayment was 10%. Also all mortgages were for 25 years. Bank lending practices were more stringent and there was some kind of rule that you could not buy a house exceeding 3x income.

Changes have been made in the last 20-30 years goosing the housing market including as increasing mortgages from 25 to 30 to 35 to 40 years and decreasing downpayments to 5% and even no money down for a period in Canada. And if you can breathe, you can get a downpayment, etc.

Kind of the same reason as consumers began buying higher end cars.

The following link provides changes from 2004 on regarding mortgage changes in Canada.

History of Mortgage Rule Changes in Canada | RateSpy.com

PreCambrian

4 years ago

Maybe there aren’t any homes left that are under $500k. That would drop sales in that range.

SleemoG

4 years ago

Reply to PreCambrian

None in the LA metro area for sure. $500K gets you 1/6 acre of land and a teardown in the barrio.

AWC

4 years ago

Two steps forward, one step back. Same as always.

Six000mileyear

4 years ago

While the charts present tell a story, one more piece of information is needed: volume by price range. This info would help answer the question: Is price increase driven by inflation, or did the bottom for the market of starter homes fall out? There is probably some of both.

Greenmountain

4 years ago

Agree with your comments but think some of the fundamentals have changed that may offset higher mortgage rates. What is the percentage of single family homes being sold to investors – either to rent or use as airbnb type property, and second home market seems to have increased as people look for a safe haven for their money. My two cents – both factors are impacting traditional fundamentals. Both in play in my area – but wonder how much buyer remorse there will be for people who moved to new areas based on some wild dreams and then they discover life was not what was expected. Funny story in Vermont where we have lots of dirts roads. When frost melts in the spring they turn to mud and sometimes become unuseable. Many newcomers are ready to pave the state. Fortunately it is not in the budget.

MPO45

4 years ago

Reply to Greenmountain

Excellent points, those are my thoughts as well. 30 years ago, we didn’t have crowd sourcing real estate sites like ArriveHomes gobbling up homes from millions of people that contribute $100 to own a piece of real estate that they can’t otherwise afford.

Essentially, we keep using the same metric for things like real estate from 50 years ago and the market has changed. Yes, ‘this time it IS different’ and I’m not clear on whether the results will be the same.

If we are heading toward 1970’s stagflation then it is likely, IMHO, it is not out of the question that a 300k house might cost 3 million 30 years from now just like a 1950’s house cost $6000 and now worth $600k+.

Lisa_Hooker

4 years ago

Reply to MPO45

It’s OK, everyone will be earning at least $875,000 per year.

Everyone else on a fixed income will be choosing a beautiful place to go die.

SleemoG

4 years ago

“2.2 months of the monthly sales pace.”

“The median existing-home sales price increased at a slower year-over-year pace of 14.8%”

Heavens to Mergatroid! Time to panic! I guess when you have a 12-year bull market in housing, giving up even a single yard of territory constitutes a bust.

New home starts/sales are cratering. Looks like existing homes is where all the action will be for a while. Guess I’ll have to get used to only 10% annual gains for the duration.

Mish

4 years ago

Reply to SleemoG

“Guess I’ll have to get used to only 10% annual gains for the duration.”

Thanks, I’ll make a note: Appreciation expected at 10% annual rate from now until eternity (unless it heads back higher).

Some real moronic comments today.

SleemoG

4 years ago

Reply to Mish

10% is the call on the field bud. When it changes, like Keynes said, I’ll adjust my opinion accordingly.

Mish

4 years ago

Reply to SleemoG

You base your assessment on calls in the field?

Did you try that in 2006?

Real gems today.

10% a year perpetually is mathematical and economic stupidity. But hey, believe what you want.

Mish

4 years ago

Reply to Mish

10% a year perpetually is mathematical and economic stupidity. But hey, believe what you want.

SleemoG

4 years ago

Reply to Mish

If I exaggerated, please forgive me.

I still have yet to see your definition of a bust. I’m not being pedantic here, I genuinely would like to know how you see this cycle playing out, having read your blog for going on 18 years now.

SleemoG

4 years ago

Reply to Mish

Also, not for nothing, you know there are fundamental differences between now and 2006 as far as fraud and subprime go. Not all booms are the same. Will it be different this time? Maybe, maybe not.

Also, fwiw, I own in OC, CA. In this specific market, positive annual appreciation in the mid to high single digits is historically accurate. If you assumed I meant the national average, then my bad.

shamrock

4 years ago

All the way down to pre-pandemic levels??? Which was a 12 year high. Oh my, lol.

Mish

4 years ago

Reply to shamrock

Are you trying to get booted.

I have had enough.

MPO45

4 years ago

Reply to Mish

Wow Mish. That’s harsh. It’s your site and you can boot whoever you want for whatever reason but I’d like to know what the rules are for not getting you angry and booted. I was thinking the same thing as Shamrock and glad i didn’t make a similar comment. Housing and the stock market is so out of whack that a drop of 30% is still out of whack.

If you don’t want comments, can’t you turn that feature off?

Mish

4 years ago

Reply to MPO45

Tired of his sarcasm on my posts. He would have been long gone on ZH months ago. I put up with a lot of dissent here, way more than any other site. And it is usually from the same people most of which have nothing to add.

MPO45

4 years ago

Reply to Mish

Thanks for the replay, will steer clear of sarcasm. This site operates best when it sticks to logic, data, analysis and commentary on said logic, data and analysis. Hypebole opens the door to everything else.

vboring

4 years ago

Prices won’t fall until days on market increases.

Current market makes no sense.

Tucsonman

4 years ago

Other option is to wait to see if prices fall and buy another house and rent current one. Seems rent prices never go down.

Tucsonman

4 years ago

I almost sold in Oct 2007 and didn’t. Regretted that for a long time. I just received an offer from institutional investor. My realtor friend ran comps and said it’s a solid deal. The agent gets 4%. No need to list. They will buy as is. Hard not to do this but I’ll need to rent for 12-24 months and see if this plays out. In Tucson AZ. It’s an 1152 sq ft 2 BR in tract housing. Nothing special. They’re offering 301k and I own outfight. Hard to find a decent rental for under $1700. Thoughts? Not sure what to do but seems like the right time to sell. What am I missing? Bought in 2004 for 138k. Feedback appreciated

Doug78

4 years ago

Reply to Tucsonman

$138K in 2004 is equal to $200K in today’s dollars so if you sell you make $100K less taxes if applicable. You will pay $20K in rent for one year so you are now clearing $80K only. Since you now feel rich you might go for a new car and a few nights on the town so in the end you might have even less. If prices tank 30% then you could buy back your house for $210K. In all if you like your house and if you own it free and clear it might not be worth it to sell it.

MPO45

4 years ago

Reply to Tucsonman

In addition to what Doug said, why don’t you consider renting it out? How much can you rent it for? $1800? That would be $21,600 in income per year every year. Over 10 years that would be $210,000 in income assuming you don’t raise the rent. Since you paid 138k then 21.6k/138k = 15.6% return annually.

I have simplified the numbers but it’s still really good. And if you don’t want to deal with tenants personally, hire a property management company that will do all the work for you, they will cut you a monthly check.

Tucsonman

4 years ago

Reply to MPO45

I’m leaning towards renting it. Long term sounds like a better plan! Thx

MPO45

4 years ago

Reply to Tucsonman

I never thought I would be renting out properties myself but inflation and tax policy have forced me into this. I forgot to mention that rental properties can save you a ton on taxes. I would suggest you watch marc kohler on youtube, he has a ton of useful advice. He also has a few good books to read. I am not affiliated in any way shape or form.

https://www.youtube.com/watch?v=QJmhkoI2ECs

honestcreditguy

4 years ago

Reply to MPO45

your forgetting taxes and maintenance

MPO45

4 years ago

Reply to honestcreditguy

I’m not forgetting anything, I said I simplified the numbers. There is also insurance, HOA, bad tenants, legal fees, and more all part of the “business” but that’s for him/her to figure out. The good thing is that it’s paid off. On a 300k house, I would expect $3000 in rent or so but every market is different.

Lisa_Hooker

4 years ago

Reply to MPO45

$1800 rental income less $1700 rent to live in seems to leave only $1200 per year.

Then there’s tax increases, special assessments, unexpected maintenance, etc.

I’d stay put in these volatile times. There are other investments more liquid than real estate. We have become used to homes selling quickly. That can change in a few weeks. It’s nice to sleep soundly.

Don’t fall for: TINA 2 FOMO

Karlmarx

4 years ago

It would make sense that average prices are rising since only people with boatloads of $$ (and hedge funds) can purchase homes now. The folks that would purchase inexpensive houses are priced out. If only Gates and Musk are purchasing houses the average price would be to the moon!

Zardoz

4 years ago

Been watching close in the PNW this last year. Last spring there was hardly anything coming on the market, and it was all gone instantly. Now I’m seeing about 5x as many come on the market, and also seeing lots of price drops. The ones that sell still go for about 10% over asking, but I think those deals are from the beforetimes.

Sitting on my dry powder, hoping for an absolute bloodbath….

randocalrissian

4 years ago

Reply to Zardoz

Prices insane enough to consider a reverse mtg to cash out the winnings and stiff the bank.

Dr_Novaxx

4 years ago

This market does need to cool off. XHB has been signaling a downtrend since the beginning of the year.

klausmkl

4 years ago

This is all healthy, a little digestion after a big meal. Prices need to digest for quite some time. Some areas will remain hot while others cool off. California is key, if it goes sour everything could go too. California is still red hot. I live in Eagle, Idaho. We are insane with growth and prices. We need wages to move up, wages here are utterly horrible.

dbannist

4 years ago

Reply to klausmkl

My mom lives in Eagle Idaho. She paid 230k for her 3/2 home in 2015. It’s now worth nearly 600k.

That’s insane and not sustainable.

MPO45

4 years ago

Reply to dbannist

I’d like to know how she is dealing with property taxes and insurance. One of my rentals I bought for 100k and insurance was under 2k. Today it’s worth 300k and insurance is almost 4k. Same story with property taxes.

People complain about high rents and “greedy” landlords but taxes, insurance and maintenance expenses are all UP!

jhrodd

4 years ago

Reply to MPO45

Wow! Why is your insurance so high? Usually landlord policies are much less than homeowner (no contents). I have a $900k house in the PNW and my homeowners policy is $770/year.

MPO45

4 years ago

Reply to jhrodd

It’s complicated. And the house is in hurricane prone area.

Mish

4 years ago

Reply to dbannist

Home prices will go up 10% annually I was just told.

SleemoG

4 years ago

Reply to Mish

Funny, I was told there would be a housing bust. Of course, I was not provided with a definition of “bust.” I wonder whose prediction will be more accurate? Guess we’ll find out.

Esclaro

4 years ago

Reply to klausmkl

Wages increasing in the boonies? Good luck with that!

Zardoz

4 years ago

Reply to Esclaro

You only get skilled wages if you have a skilled workforce.

SleemoG

4 years ago

Reply to klausmkl

Idaho’s theocracy is almost complete. That might temper immigrant enthusiasm enough, especially from California, to tame your RE market.

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