Is America’s newly minted housing bubble bursting?!
I’m just kidding. The answer is “no.” Or, actually, the answer is “not yet.”
Pandemic effects and the lowest mortgage rates in history likely mean the flaming-hot US housing market has some scope to get even more “bubbly,” but it’s worth noting that existing- home sales did fall in November, the National Association of Realtors said Tuesday.
The 2.5% drop to a seasonally-adjusted annual rate of 6.69 million was in-line with estimates. October was revised to 6.86 million.
November’s decline snapped a five-month streak of sequential gains. But before you read too much into this “weakness,” do note that November’s pace still represented a 25.8% increase from a year ago.
Prices are sharply higher. The median existing-home price was nearly $311,000 last month, the NAR said. That’s up almost 15% YoY.
“Home sales in November took a marginal step back, but sales for all of 2020 are already on pace to surpass last year’s levels,” NAR chief economist Lawrence Yun remarked. “Given the COVID-19 pandemic, it’s amazing that the housing sector is outperforming expectations.”
Despite Yun feigning incredulity, there’s no mystery here. The pandemic is responsible for this, both directly and indirectly.
Directly, in the sense that between i) the hazards of being close to other humans when a deadly virus is spreading unchecked, and ii) the proliferation of work-from-home arrangements, it makes sense to buy a house if that’s economically feasible for you.
Indirectly, because the pandemic forced the Fed into adopting the most accommodative monetary policy stance in history, which has helped mortgage rates hit record lows on 15 (!) separate occasions in 2020.
The market is still tight, which I suppose goes without saying. Total inventory at the end of last month was 1.28 million units. That represented a 10% drop from October, and a 22% decline from last year.
The supply of unsold inventory hit a fresh record low of just 2.3 months’ worth at the current sales pace.
If you’re wondering what the outlook is for next year, Yun has something to say about it. He cited the stimulus package, vaccine distribution, and “very strong demand for homeownership” in predicting that “robust growth is forthcoming for 2021.”
So, the housing market wins no matter what, I guess. If the pandemic is raging, people want to borrow on the cheap to buy a fortress to hide in, and if the pandemic abates and the economy recovers, mortgage rates will still be near record lows and people will be more comfortable with their economic prospects.