More cracks in the foundation? Or perhaps it’s “just a supply thing.”
You can write your own script, but existing US home sales fell more than expected in April, data out Thursday showed.
Although the “miss” was negligible (the 5.61 million annual pace was very close to consensus), it nevertheless served as incremental evidence to support cautious assessments of the housing market at a time when mortgage rates are rising rapidly and the Fed is poised to start unwinding its MBS portfolio.
April’s decline was the third consecutive (figure above). March’s pace was revised lower.
The figures came during a week that featured a bevy of disappointing data, including slower housings starts, a fifth straight decline in homebuilder sentiment and an 11% decline in mortgage applications.
Read more: Mr. Powell, Tear Down This Housing Bubble!
Thursday’s NAR data showed the median price of existing homes rose 14.8% YoY to $391,200.
An air of determinism is creeping into the commentary. “Higher home prices and sharply higher mortgage rates have reduced buyer activity,” Lawrence Yun, NAR’s chief economist, said. “It looks like more declines are imminent in the upcoming months.”
Yes, it does “look like” that. The good news is, supply is improving. Inventories of unsold existing homes rose to 1.03 million by the end of last month. That’d last around 2.2 months at the current monthly sales pace, up from 1.9 months in March.
Of course, it’s going to be a long time before supply is any semblance of adequate, and that means the mismatch with demand can (theoretically anyway) support prices, even at very elevated levels. Days on the market was 17 in April, unchanged from March.
What’s not clear, though, is whether would-be buyers, squeezed on all fronts from rising costs for basic necessities to falling stock prices, will be interested at mortgage rates that are double what they were in January of 2021.
“The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago,” Yun said Thursday.
Housing is also being squeezed by all the private equity investors who are pouring into rental properties and then aggressively jacking up the rents.
H – There are always lots of financial news informational tidbits that reflect real-time changes in the financial well-being of noteworthy companies and the economy. But the combination of stories this week is telling. Thanks as always for bringing these stories to our attention. The cascade of reports this week reminds me of the force of gravity on Niagra Falls. There’s no arguing with it. The implications have real value for understanding the evolving state of the economy. Unfortunately, the market doesn’t exude a sense of safety, and we don’t know for sure whether we’ll see a recession. But it doesn’t look good.
I am hopeful we’ll have a shallow recession. In parallel, and seemingly unrelated, the Russians have been terrible in managing the logistics of the war in Ukraine. There are some reports from retired US military brass that Russia will exhaust its supply of missiles, armor, and troops this summer. If so, I have my fingers crossed that some form of resolution to the Ukraine war will loosen pressure on the price of oil later this year, providing fresh air for the US and the world economy. But in the short-term we may reasonably expect that a recession will occur in the US, creating more uncertainty, and holding down stocks.
My Sister has been making a killing in Seattle area real estate for two years…….mostly because she has so many former clients
who are retiring/downsizing or moving. What she hasn’t been able to do is find houses for buyers and she blames that entirely
on lack of supply.
No doubt higher rates will make housing less affordable for many Americans……but how does that solve the base problem of
too few affordable housing units?