Not enough available homes!
That’s the problem on the resale side of a bifurcated US housing market. Data released Thursday testified to a familiar supply shortage narrative which says an acute dearth of existing inventory is herding would-be homebuyers into new construction, where sales are solid.
Pending home sales were flat in April, the NAR said. That compared to estimates for a small advance and suggested existing home sales could remain weak for the remainder of the spring buying season.
The range of estimates, from two-dozen surveyed economists, was -4% to 3.2%.
Recall that pending sales plummeted seemingly out of the blue in March. That month’s index reading was unrevised, which you might suggest makes April’s unchanged print seem even more noteworthy.
“Not all buying interests are being completed due to limited inventory,” NAR Chief Economist Lawrence Yun said Thursday. “Affordability challenges certainly remain and continue to hold back contract signings, but a sizable increase in housing inventory will be critical to get more Americans moving.”
The problem, of course, is that a “sizable increase” in resale inventory will likely require either much lower rates or a recession. Put differently: Either the psychological hurdle to trading up (i.e., financing a portion of a “next” purchase at a higher rate) has to be removed or else job losses have to force sales. Otherwise, the incentive just isn’t there for many homeowners.
A lack of resale supply was blamed in part for a 14th decline in existing home sales in 15 months. Mortgage rates rose to the highest since March over the last week, curbing applications.
It’s worth noting, in the context of new construction, that Toll Brothers this week said it raised prices by an average of $25,000 per home in Q1 and incentives dropped to $50,000 from $70,000. The company now sees deliveries of between 8,900 and 9,500 for the full year, up from 8,000 to 9,000 and well above the 8,565 consensus.
But, again, that’s the new construction side. It’s a different dynamic for resale properties. “Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications,” MBA Vice President and Deputy Chief Economist Joel Kan said. “Refinance activity remains limited, with the refinance index falling to its lowest level in two months and more than 40% below last year’s pace.”
