The number of homes on the market relative to sales is soaring.
The NAR reports Existing-Home Sales Drop 0.5% in April.
Key Highlights
- Existing-home sales slid 0.5% in April to a seasonally adjusted annual rate of 4.00 million.
- Sales are down 2.0% from one year ago.
- The median existing-home sales price rose 1.8% from April 2024 to $414,000, an all-time high for the month of April and the 22nd consecutive month of year-over-year price increases.
- The inventory of unsold existing homes bounced 9.0% from the previous month to 1.45 million at the end of April, or the equivalent of 4.4 months’ supply at the current monthly sales pace.
- Sales are down 36.9 percent from the cycle high of 6.34 million in January of 2022.
NAR Chief Economist, Lawrence Yun, notes “Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with seven million jobs added to the economy. Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand.”
There is no “pent up demand” at these prices.
Factor in mortgage rates, now back above 7 percent, the highest in three months, a slowing economy, and massive tariff uncertainty. Housing is going nowhere until prices collapse and mortgage rates come down.
Yun cannot say that, so he sings the same happy tune for years.
Existing-Home Sales Percent Change from Month Ago
There has been a cyclical peak in sales in February for three straight years.
This is a sign of faulty seasonal adjustments.
Existing-Home Sales Percent Change from Year Ago
Year-over-year comparisons are now pretty easy so we may see more meanderings above the zero line if sales hold at these levels and especially if they advance.
Existing-Home Sales Supply
This is the critical chart.
First notice the obvious seasonal patterns. Whereas the monthly surge of sales suggests poor seasonal adjustments, this chart screams poor seasonal adjustments.
Regardless, the increase in supply is obvious. And if the pattern holds we are going to see supply surge over 5 months later this year.
Stagnant sales coupled with rising supply should start impacting prices to the downside.
But to approach affordability we need to see prices drop by at least a third accompanied by lower mortgage rates too.
Q: Will the bond market accommodate that need?
A: Not if we are headed for stagflation.
Related Posts
May 20, 2025: Trump’s “One Big Beautiful Bill” Would Increase the Deficit by $4.8 Trillion
Penn Wharton updated their budget analysis of the House bill as it now stands.
May 21, 2025: The Bond Market Is Fed Up with Fiscal Irresponsibility, Yields Surge
The yield on the long bond and the 10-year Treasury surged today on deficit concerns.
The fundamentals and the technical charts are singing the same tune.
Q: What Tune Is That?
A: Stagflation accompanied by a weakening US dollar
Note: The House passed the One Big Beautiful Bill today. It’s worse than the above. I will comment on that shortly.
your other mail talked about new furniture. In my 73 years of life i have never bought new furniture.
“The number of homes on the market relative to sales is soaring.”
Still, in most big cities, inventory is much lower than historical.
There’s a lot of big cities in Florida and Texas, Jim.
There is something really fishy going on in California with respect to supply. At least Southern California. When California finally joins in on the supply poop show, watch out.
My area of Massachusetts is declining in population, but it’s one of the areas in the country where prices are up double digits year over year because housing inventory is severely constrained. No sign of that changing yet.
Wisconsin (except for Madison) is also declining in population, but it’s another state where housing prices are going up double digits because of tight inventory.
Since mortgage rates don’t look like they’re headed down anytime soon, the only thing that’s going to break locked up housing markets like these is job losses, and it looks like those are on the way.
Meanwhile, in places like Ohio and Indiana that used to cheap, inventory is piling up. Is that starter house that sold 5 years ago in Indianapolis for $100K really worth $300K now at 7%?
People think the Midwest is booming because people suddenly found a “hidden gem” or something…NO WAY! It’s just that investors ran out of places that could cashflow and had no choice but to expand their horizons. Likewise, some homebuyers saw it as the last bastion of cheap homes (cheap for a reason!)
This housing market is no where near as over leveraged as the 2008 situation. Many homeowners have no mortgage and many that do have mortgages are stuck for life with a sub 4% mortgage. A few classes are vulnerable:
The VRBO multiple home owners that can not carry their property when the taxes and insurance spiral higher and rents fall.
Fixed income owners that see their insurance and taxes eclipse their income.
People that lose their job. (this might be more than I think).
Anyone that retired to the sweltering, bug infested south that can not get insurance on their waterfront mold hole.
Mole Hole! Thats a good one… 😉
It doesn’t matter, those who are off the playing field are off the playing field and it’s as if their houses don’t exist to a large extent. The crazy covid prices were set by a tiny percentage of buyers on the margin of the market (due to the comp system) and likewise the declines will be determined by the marginal seller as well when the supply/demand pendulum swings (as it clearly already is).
Correct on that point about those that will not be selling, period.
The buyers that paid premiums to buy in the last two years and started with 10% or 20% down and 6%+ mortgages are vulnerable to getting upside down. I do not see anything like the 2006-2011 collapse on the horizon. even is prices drop 20% the market should be OK.
The outlier is of course our lack of leadership and the fantasy tariffs that are supposed to be raising revenue. What they are doing is costing us jobs and tax revenues.
The idiot in chief failed 4th grade math but bullied his classmates to let him cheat off of their papers. Scary incompetence in our nations leadership.
Imagine if Michael Bloomberg had been supported by one of the parties and won. There would be someone that has the economic knowledge and personal connections to get this ship righted.
Sigh!
Just a reversion to normality in home prices, means that a 20% national decline is very much in the cards over the next three years imo. Inevitable in my view. Austin is already easily 20% down from peak (I know Austin’s story was not typical, but it still lost 20%+ with ZERO economic turmoil in the background, which bodes very poorly for the broader market should there be economic turmoil ahead). But the real question is, what millennial/zoomer/investor who paid 1 million for an 800k house is going to keep paying on it? So I am expecting another jingle mail phase around 28, which could take the market down 30% from the crazy c19 peak.
Look at home values in 2015 and apply a 4% to 5% annual appreciation rate. That is where home values generally should be now as far as return to the norm or mean.
An “automatic” annual 5% home price appreciation rate is nothing but a realtor MYTH. It became a rule of thumb because interest rates have ben falling for 40 years, so it seemed like the “natural” norm, but it was never “automatic”, it was a function of falling rates, plus wage inflation. Now we have rising rates, plus low wage inflation, plus looming UNfavorable demographics. and everything that we “know” about home price appreciation is subject to change.
I was a blogger on Housing Panic Blogspot from 2006-2010, and we always laughed at Larry Yun WAY back then. . .he kept a happy face during the meltdown, and just called it a “correction.” Kind of like the Titanic had a slight water leak problem.
Look out below with the housing bubble part 2.
I suspect people will hold on to hard assets like houses, gold and yes, even bitcoin as long as deficits continue to balloon out of control.
Most people know inflation and debt is out of control at all levels so it makes sense to buy hard and stay hard.
Bitcoin doesn’t pass any definition of “hard asset” that I’m aware of.
Investopedia says:
What Is a Hard Asset? A hard asset refers to a tangible asset or resource with fundamental value. Examples of hard assets include a fleet of trucks for the delivery of consumer goods, land, real estate, and commodities. Businesses purchase hard assets to help improve production, increase revenues, and act as a buffer against soft asset losses. However, sometimes the value of hard assets decreases in tandem with the value of soft assets.
KEY TAKEAWAYS
Bitcoin is the scam of scams, not much different form a Ponzi, but it’s a scam that the world has seemingly embraced nonetheless. No matter how high it goes, I can never be a bitcoin bull because I know that if it ever actually competed with the dollar, it would be outlawed. People will say that it can’t be outlawed, a lot of law-abiding citizens will not want any part of an “illegal” asset so the value will crater very hard simply due to its new status.
Housing has never been so out of whack with market realities. There used to be balance in the marketplace — not anymore. We should see reality set in soon, however. This nonsense has to end.
Well maybe if POS Joe Biden (sorry no automatic medical/age sympathy) wasn’t literally paying off people’s mortgages and auto-rescuing the banks, we’d be much further along this road.
The Housing Market Has New Rules. Realtors Are Evading Them
The Housing Market Has New Rules. Realtors Are Evading Them. – The New York Times (archive.ph)
No one ever wants to give up the golden goose.