A lack of supply weighed on US home sales last month, data out Thursday showed.
Sales of existing homes fell 4.6% in December, the NAR said. It was the first decline since August (figure below).
All four major regions saw sales drop last month on both a MoM and YoY basis.
The 6.18 million annual pace missed estimates. Consensus wanted 6.42 million. The forecast range, from nearly five-dozen economists, was 6.23 million to 6.62 million. So, the actual print was lower than the most pessimistic guess.
Lawrence Yun, NAR’s chief economist, blamed lean inventories. “December saw sales retreat, but the pull back was more a sign of supply constraints than an indication of weakened demand for housing,” he said Thursday, in a press release.
Still, he did caution that buyers can expect higher borrowing costs in 2022. Mortgage rates are up three straight weeks to start the year, following Treasury yields higher.
The most recent weekly rise was pronounced (figure above).
New data from Redfin showed an acute dearth of inventory led to the biggest drop in transactions since June of 2020 last month. “Home sales are slumping, but not for lack of demand,” Redfin chief economist Daryl Fairweather remarked.
“There are plenty of homebuyers on the hunt, but there is just nothing for sale,” Fairweather went on to say, adding that “in many markets, shopping for a home feels like going to the grocery store only to find the shelves bare.”
At some point, one imagines market watchers will be compelled to acknowledge the dual threat of higher mortgage rates and sky-high prices. NAR’s data showed the median price of existing homes in December was almost $360,000, up nearly 16% YoY. The median sales price in Redfin’s data was $383,000.
Yun noted that inventories hit a record low last month. Although he cited progress over the first three weeks of the new year, he also warned that “reversing gaps like the ones we’ve seen recently will take years to correct.”
Maybe. Probably, even. But, it could be that demand destruction comes sooner (and faster) than it’s currently feasible to envision. Would-be buyers already face an extremely onerous downpayment burden. Toss in the prospect of sharply higher rates, and (gasp) a Fed policy mistake that finds the economy stumbling into a shallow downturn, and you’re left to wonder if the demand side might catch down to the supply shortage rather than the other way around.
For now, though, it’s a supply story. The NAR report showed there were 910,000 units on the market at the end of December, 18% fewer than November. Yun called the increase in first-time buyers “significant.” “It’s likely,” he said, “that a portion of December buyers were intent on avoiding the inevitable rate increases.”
I would posit that affordability (both available rates and purchase price) is pushing supply down. Current owners don’t feel they can afford their next house, so they shelter-in-place as it were.
I expect this trend to last for the better part of a decade until the Boomer generation moves on either to their end of life housing (which is likely rented) or they ultimately pass.
I don’t see the massive housing demand “backlog” being alleviated until large scale building programs are implemented, which means state and federal governmental policies/programs. Of course this idea is DOA in Repub led legislatures, thus more population will flow to states that actually care about people and have generally healthy economies.
And the GOP is actually fine with this since they are able to maintain their power through the Senate which relies on less populace states voting for them.