Understanding Pending Sales
New home sales are recorded at contract signing but existing home sales at closing. The pending home sales index is a gauge of future existing home sales reports.
The National Association of Realtors reports Pending Home Sales Descend 3.9% in April
Key Points
- The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, slid 3.9% to 99.3 in April.
- This was the 6th consecutive month of lower sales.
- Year-over-year, transactions fell 9.1%, the eleventh month of lower sales.
Pending Home Sales Year-Over-Year
Going to Get Worse
Ignoring the brief Covid-related downturn, we have not seen a dip like this since 2011.
But it’s going to get worse.
NAR Pending Home Sales Data Provides More Evidence of a Severe Housing Slump
On May 23, I commented NAR Pending Home Sales Data Provides More Evidence of a Severe Housing Slump
Active listings are down and pending listings of all contracts are down 17.4%
- Based on preliminary data, new contracts signed decreased 11.7% on a year-over-year basis while new pending listings increased 1.1%.
- The inventory of pending listings (all contracts signed) was down 17.4% from one year ago, while the inventory of active listings fell at a lower rate of 4.2% from one year ago.
New Home Sales Plunge 22.5% In April, 16.6% From Deep Negative Revisions
In case you missed it, please see New Home Sales Plunge 22.5% In April, 16.6% From Deep Negative Revisions
On May 19th I noted Existing Home Sales Skid to Pre-Pandemic Level, a Housing Bust is Underway
Relative Economic Activity Importance
- New home sales are an indication of family formation, but for current economic impacts, existing home sales are far more important because they dwarf new home sales.
- The current seasonally-adjusted annualized rate of new home sales is 591 thousand.
- The current seasonally adjusted annualized rate of existing home sales is 5.61 million.
Reflections on Inventories, Retail Sales, and Durable Goods
This morning I noted Inventories Look Historically Lean Compared to Sales, But Appearances Deceive
Here is one key point.
https://twitter.com/FreightAlley/status/1529627377248116736
“A lot of items in excess inventory are seasonal & big-ticket. Rather than heavy discounting, we are more likely to warehouse these goods until they sell. It will mean slower shipping volumes, probably most notable in Q4/Q1.”
I asked, Really!?
This morning, Craig Fuller made a second pertinent Tweet that I added to my post.
https://twitter.com/FreightAlley/status/1529822858041384966
Pent Up Demand In Reverse
When people buy new and existing homes, especially the latter, they buy appliances and remodel.
Remodeling includes new appliances, landscaping, furniture, kitchen cabinets, paint, etc.
Demand for those items is guaranteed to plunge. This is happening just as ports are opening up in China.
We are going to see price deflation in goods. But what about food, energy, and rent?
Can the Fed reduce demand for food, energy, or rent?
The answer is no, partially, and no.
I discussed this previously in Food, Rent, and Energy Prices are Totally Outside the Fed’s Control
“Totally” is incorrect.
Energy is partially in the Fed’s control. People will still drive to work and heat their homes, and the Fed cannot control the war in Ukraine or other supply disruptions.
But if the Fed crushes the stock market, recreational demand for energy will drop. And energy used in the production of goods will also fall.
Rent has the biggest influence on the CPI. I will discuss rent in more detail in a future post.
This post originated at MishTalk.Com.
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Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 20, 2022.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week and was 75 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 0 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 16 percent lower than the same week one year ago.
Homebuyer affordability decreased in April, with the national median payment applied for by applicants rising 8.8 percent to $1,889 from $1,736 in March. This is according to the Mortgage Bankers Association’s (MBA) Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time – relative to income – using data from MBA’s Weekly Applications Survey (WAS).
“Rapid home-price growth, low inventory, and an 80-basis-point surge in mortgage rates slowed purchase applications in April, with the typical borrower’s principal and interest payment increasing $153 from March and $569 from a year ago,” said Edward Seiler, MBA’s Associate Vice President, Housing Economics, and Executive Director, Research Institute for Housing America. “Despite strong employment and wage growth, housing affordability has worsened since the start of the year. Mortgage payments are taking up a larger share of homebuyers’ incomes, and sky-high inflation is making it more difficult for some would-be buyers to save for a down payment or come up with the additional cash they need to afford a higher monthly payment.”