While I was busy writing about important things on Monday morning, the first of this week’s deluge of notable data missed estimates, as pending home sales “unexpectedly” dropped a second month.
Note the scare quotes. To me, any weakness that shows up in the housing market stateside isn’t “unexpected.”
I’ve variously argued that sales (and prices) are almost destined to fall from here after an absurd run in the post-COVID era. I’ve also readily admitted (on countless occasions) that just as my “lens” for analyzing politics, markets and macro is somewhat unorthodox, so too is my approach to housing.
No one would describe me as a “traditional” buyer. I think about houses the same way I thought about my first Oyster Perpetual — if you can’t afford to buy it outright five times over, you can’t actually afford it. That kind of attitude makes me anomalous in most situations. It may also make me very stupid. But it helps me sleep at night.
In any event, pending home sales fell 1.8% last month (figure below) against expectations for a small increase. The range, from two-dozen economists, was -3% to 2%.
The index, at 110.7, now sits at a three-month nadir.
There’s no mystery here. Prices are too high. NAR chief economist Lawrence Yun underscored as much in last month’s release (covering June) when he noted that “buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”
Right. Kinda like I’m “still interested” in that Flying Spur I look at online every Sunday evening, and “want to own a Mulsanne,” but not at a price point comparable to three Carreras.
Yun was constructive Monday while describing the outlook. “The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers,” he said, adding that “inventory is slowly increasing and home shoppers should begin to see more options in the coming months.”
The latest read on the market comes amid mounting affordability questions. Last week’s new home sales data showed average prices resuming their ascent to hit $446,000 in July, up 65% from a decade ago. The median price rose to $390,500, up more than 18% in just 12 months.
Read more: Regular People Can’t Keep Buying $400K Homes
More housing figures are due later this week.
Meanwhile, the Dallas Fed was a woeful miss, printing 9 versus an estimated 23 (figure below).
That was the lowest headline read since January.
The story is the same. Businesses are generally upbeat despite rising (and persistent) price pressures. “Prices and wages continued to increase strongly in August,” the color accompanying the survey said. “Expectations regarding future manufacturing activity remained optimistic, though the future general business activity index was less positive [and] the survey’s more tangible measures of future factory activity held up better but also slipped slightly.”
Peak growth. But sticky (higher) prices. You know what that spells.
Age appropriate????