“Buyers likely want to secure a home before mortgage rates increase even further next year,” NAR chief economist Lawrence Yun said Thursday.
He was referring to a surprisingly robust read on existing home sales for September.
The 6.29 million annual rate was the highest since January (figure below) and the 7% monthly increase the largest in a year.
Yun noted incremental improvements in supply which helped “nudge” up sales.
Earlier this week, government data showed housing starts fell in September while permits dropped the most since February.
A year on from the pandemic-inspired property boom, it’s impossible to know how much weight to assign to the housing numbers. In fact, it’s becoming more difficult to determine what is and isn’t worth covering in terms of incremental data (any data) at a time when the US economy is essentially in limbo, adrift somewhere between a stimulus-fueled sugar high and a slowdown exacerbated by waning fiscal and monetary impulses.
In a sea of ambiguity, the housing market is perhaps even more difficult to read than the labor market. As I put it Tuesday, you can tell pretty much any story you want to tell, because when it comes to explaining the persistence of various imbalances, the list of contributing factors is a mile long.
Prices are stratospheric. The median existing-home price last month was nearly $353,000. That was up more than 13% YoY. Prices rose in every region, as did contract closings. 86% of homes sold last month sat on the market for less than 30 days. The average was just 17 days. Months’ supply is just 2.4.
It’s tempting to throw up one’s hands and suggest that a combination of demand destruction, higher mortgage rates and increased supply (as builders catch up) will solve various “problems.”
“As mortgage forbearance programs end, and as homebuilders ramp up production – despite the supply chain material issues – we are likely to see more homes on the market as soon as 2022,” Yun suggested on Thursday.
While conceding there’s not much else one can say, falling back on market forces feels unsatisfying.
Implicitly or explicitly, we’ve all lampooned the “transitory” characterization of inflation by now. Indeed, even if you count yourself in “team transitory,” you’ve probably made a “transitory” joke. Apropos, the October vintage of the Philadelphia Fed survey (also out Thursday) showed price indices remained elevated near four-decade highs (figure below).
What’s becoming clearer and clearer by the month is that it’s not just inflation that looks poised to stick around longer than economists expected, but virtually every distortion associated with the pandemic.
And that speaks to why editorializing around the data has become tedious. Every month it’s the same story. And resolution isn’t forthcoming.
As vexing as it is for market participants, it must be even more so for policymakers.