November 27 2023

The Census Bureau released the monthly New Home Sales report today, showing a decrease from 719k in September (revised down from 759k initially reported) to 679k in October.  While this number is below the long term trend that emerged after the Great Financial Crisis, it's still in league with the pre-covid highs. The post-covid story for the housing market has been one of ever-dwindling inventory and its various effects.  One of the most obvious effects of lower EXISTING home inventory is that NEW homes have captured a larger share of the market. Existing homes have moved lower, almost exclusively from the peak.  The divergence from New Home Sales has been especially notable since mid-2022 when rates really began skyrocketing. The following chart shows the percent change in both new and existing sales from the peak. Perhaps most notable is the price trend during the time when sales were down more than 40%.   An inventory crunch is the only thing that could explain the juxtaposition of a sharp decline in sales and a sharp increase in values, but it's important to note the 3rd ingredient in play during the highlighted time frame above: incredibly low rates. Prices stopped accelerating almost as soon as rates began to jump. What's the takeaway for the housing market?  Today's report doesn't tell us much.  Anything in the 650-750k range is fairly neutral.  Additionally, the outlook may be rapidly changing to whatever extent the highest interest rates are behind us.  That's a possibility that will receive more clarity with next week's economic data, but it will take several months to confirm.

November 22 2023

An improved (albeit slightly) mortgage interest rate environment helped push the volume of mortgage applications higher during the week ending November 17. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, grew 3.0 percent on a seasonally adjusted basis from one week earlier. However, it declined fractionally on an unadjusted basis. The Refinance Index increased 2 percent from the previous week and was 4 percent lower than the same week one year ago. The refinance share of mortgage activity represented 32.4 percent of total applications, up from 31.9 percent the previous week. [refiappschart] The seasonally adjusted Purchase Index rose 4.0 percent from the prior week but declined 1.0 percent unadjusted. Purchase applications were 20 percent lower than the same week one year ago. [purchaseappschart] “U.S. bond yields continued to move lower as incoming data signaled a softer economy and more signs of cooling inflation. Most mortgage rates in our survey decreased, with the 30-year fixed mortgage rate decreasing to 7.41 percent, the lowest rate in two months,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “ Mortgage applications increased to their highest level in six weeks but remain at very low lev els. Purchase applications were up almost four percent over the week, on a seasonally adjusted basis, as both conventional and government purchase loans saw increases. The average loan size on a purchase application was $403,600, the lowest since January 2023. This is consistent with other sources of home sales data showing a gradually increasing first-time homebuyer share.”

November 21 2023

Existing home sales achieved their lowest annual level in ten years in September, and now appear to have doubled down. The National Association of Realtors® (NAR) said sales of pre-owned single-family homes, townhouses, condominiums, and cooperative apartments fell another 4.1 percent in October to an annual rate of 3.79 million homes. This is 14.6 percent below the 4.44 million level of sales in October 2022. Single-family home sales decreased to a seasonally adjusted annual rate of 3.38 million, a 4.2 percent decline from 3.53 million in September. Condo/co-op sales fared slightly better, slipping only 2.4 percent month-over-month to an annual rate of 410,000 units. Both single-family and condo/co-op sales were 14.6 percent lower than the same month last year. [existinghomesdata] Analysts had expected a less drastic decrease from the 3.95 million level of sales in September. Both Econoday and Trading Economics had consensus estimates of 3.9 million. "Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation," said NAR Chief Economist Lawrence Yun. "Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market." There were 1.15 million housing units available for sale at the end of October. This is an increase of 1.8 percent from the previous month but 5.7 percent fewer homes than a year earlier. Unsold inventory sits at a 3.6-month supply at the current sales pace, up from 3.4 months in September and 3.3 months in October 2022.