America’s is a bifurcated housing market.

If you fancy yourself a macro watcher, you should be able to write this story from memory. It’s actually a tale of two markets: That for existing homes and that for newly-built dwellings.

High rates are keeping sellers, but not necessarily buyers, at bay, creating a mismatch between resale inventory and demand for existing homes. That, in turn, is herding would-be buyers into new construction.

Homebuilder sentiment hit a 10-month high in May, and the S&P Composite 1500 Homebuilding gauge is enjoying a massive rally from last year’s lows. Indeed, it’s near a record.

What’s better than big-tech in 2023? Homebuilders, that’s what.

According to the NAHB, a third of homes listed for sale are new homes, either completed or under construction. That figure was less than 13% on average in the two decades leading up to the pandemic.

You can’t buy what isn’t for sale, and, again, what’s not for sale are existing homes. It’s thus no surprise that existing home sales fell again in April, according to data released on Thursday.

The 4.28 million annual rate was slightly slower than consensus expected, and the 3.4% drop marked the 14th decline in 15 months.

Inventory actually rose 7% from March, but tellingly, the 1.04 million available units was barely more than April of 2022. A slower sales pace meant months’ supply was considerably higher versus the same month last year (2.9 versus 2.2), but that gets us into a chicken-egg dilemma.

“The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand,” NAR Chief Economist Lawrence Yun said Thursday, noting that “roughly half of the country is experiencing price gains.”

On a YoY basis, prices fell a second month. As a reminder, we’re currently witnessing the first annual declines in more than a decade.

And yet, at $388,800, the median price rose from March, and is far closer to record highs reached midway through last year (around 6% below) than it is to pre-pandemic levels (some 35% above).

Yun went on to note that the spring buying season has seen the return of multiple offers, and said distressed sales are “virtually nonexistent.” Properties were on the market for just three weeks in April, when three-quarters of homes sold in less than a month.

“The more than doubling of mortgage rates over the past 18 months means many homeowners who would like to move are effectively locked in by the cheap financing they secured on their current property,” ING’s James Knightley remarked. “New home sales have consequently been performing more strongly despite the drop in mortgage applications for home purchases — the buyers that are out there simply don’t have much to choose from.”

As ever, it’s difficult to see how the myriad distortions evident across the US housing market are going to resolve in the near-term. According to the MBA, the typical mortgage for a new home taken out last week was around $440,500. The rate was more than 6.5%. Monthly payments are now at record highs above $2,800, up more than $1,000 in just 12 months.

In a new note, Barclays’ Matthew Bouley alluded to a point I’ve made in these pages repeatedly over the past few months — namely that large builders can pair buydowns with price hikes in the current environment.

Builders, Bouley said, are “able to uniquely leverage buydowns and mounting buyer urgency as home prices have bottomed.”