The Econoday economists missed the mark badly this month on existing home sales.
Single-family home sales fell 3.0%. Overall sales fell 2.5% for the month and were lower than even the lowest estimate.
Year-over-year sales are down 1.4%. Last month sales were down 1.2% year-over-year. Sales have pretty much stagnated since June of 2015!
Mortgage News Daily reports Existing Home Sales Reverse Course, Down 3%.
Economists polled by Econoday were not looking for greatly improved numbers but results even missed that target. Estimates ranged from 5.48 million to 5.64 million. The consensus was for no change from the March 5.60 million number.
Single-family home sales were down by 3.0 percent to a seasonally adjusted annual rate of 4.84 million from 4.99 million in March and are 1.6 percent below the 4.92 million sales pace a year ago. Condo and co-op sales continued their recent strong performance, rising 1.6 percent to 620,000 units, level with sales in April 2017.
What NAR called “staggeringly low inventories” of available homes again got the blame for the disappointing sales volume even though that inventory rose sharply from March. Lawrence Yun, NAR chief economist, says “The root cause of the underperforming sales activity in much of the country so far this year continues to be the utter lack of available listings on the market to meet the strong demand for buying a home,” he said. “Realtors® say the healthy economy and job market are keeping buyers in the market for now even as they face rising mortgage rates. However, inventory shortages are even worse than in recent years, and home prices keep climbing above what many home shoppers are able to afford.”
The median existing-home price for all housing types in April was $257,900, up 5.3 percent from the median of $245,000 a year ago. The increase marks the 74th straight month of year-over-year gains. The median existing single-family home price was $259,900, a 5.5 percent annual increase and condo/coop prices rose 3.4 percent to $242,500.
The much-lamented inventory of available housing stock at the end of April was 1.80 million homes. This was a significant 9.8 percent uptick from March but is still 6.3 percent lower than the 1.92 million homes for sale the previous April. For-sale listings constitute an estimated 4.0-month supply at the current rate of absorption compared to a 4.2 month supply last year. The inventory has fallen year-over-year for 35 consecutive months.
Not an Inventory Problem
Lawrence Yun repeats the same nonsense month after month.
Supposedly 5 months supply is normal. If sales continue to decline, we will have 5 months of inventory. What would he say then? Who knows, but I suspect we will find out.
This is not an inventory problem. The problem is affordability.
Affordability Cycle
With prices rising for 74 consecutive months, young people cannot afford to buy homes. Sellers want more for their homes than they can get. They need more than they can get because they will have to pay more for a replacement.
There is plenty of supply, just not at prices sellers want or buyers can afford.
In the next downturn, the number of would-be buyers will decline and the lack-of-inventory mirage will vanish.
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Reader Comment
“If I was a member of the National Association of Realtors, I’d ask for a refund based upon the salary paid to Lawrence Yun. He has made terrible predictions for years.”
My Reply
You have to recognize Yun for what he is: an NAR mouthpiece. He likely serves the NAR well.
Mike “Mish” Shedlock
Mish said “Sellers want more for their home than they can get.”
If that were the case we’d expect to see houses for sale, languishing on the market with Buyers reluctant to buy at the given prices. This however is not the case, at least not here in California. The average “Days on Market” for all localities I am aware of are hovering between 60 and 90 days. This would indicate a ready supply of Buyers.
My numbers do not indicate a bubble. I track my house price estimate (using comps. and ensuring that I’m at least a few percent below the Zillow estimate) against a range of measures (U.S. Inflation adjusted Productivity, my local MSA GDP, my state’s median prices, etc.). I index everything to Year 2000 = 100. Sure enough we see the estimate grow to about 150 during the 2002-2007 periods, then drop back to the high 90’s in 2010, only to climb to about 110 (i.e. 10% overpriced) currently.
The only thing you “break” by lowering the supply of heroin to a junkie, is the addiction itself. Everything else you move (even if only minimally) in the opposite direction, towards “fixing.”
As pertains to all things that matter, Volcker fixed stuff. If, again, only to a woefully incomplete and temporary extent. If he, in the process, happened to break up a few drug parties hosted by and for well-connected consummate idiots living it up on Fed sponsored welfare….. talk about gray zone between irrelevant noise and a straight up good thing!
The Fed ALWAYS tightens until something breaks.
It sure looks like they have broken housing.
Many emerging market currencies have already broken.
So far it’s safe to say they haven’t yet broken the stock market – although there hasn’t been a new high in the S&P in months.
You have to recognize Yun for what he is: an NAR mouthpiece. He likely serves the NAR well.
If I was a member of the National Association of Realtors, I’d ask for a refund based upon the salary paid to Lawrence Yun. He has made terrible predictions for years. He is never wrong in his opinion. He always has a justification for his errors.
Interest rates go up causing demand to go down soon to be followed by lower prices.
Mish said “Sellers want more for their home than they can get.”
I think that is definitely the case, regardless of what a replacement would cost.
The volume of “cash-out re-fi’s“, even with rising mortgage rates, has been enormous. Mish recently did a post on the “Housing ATM is Back”. These people have little equity remaining and even with steady price appreciation are in no position to sell. It would take a 2004-2005 style “blow-off top” move in prices for them to be able to.
Yet another unintended consequence of 8 years of zero interest rates on bank deposits.