Pending home sales unexpectedly rose in the US last month, data released on Wednesday showed.
It was the second straight increase and ostensibly bodes well for existing home sales, which are mired in a long-running slump amid a lack of available resale properties.
July’s 0.9% increase from June compared favorably with consensus, which expected a 1% decline. The range of estimates from two-dozen human weather-vanes was -5% to 3.2%. Sales fell 14% YoY.
“Jobs are being added thereby enlarging the pool of prospective home buyers,” NAR chief economist Lawrence Yun said. “However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”
Yes indeed. Mortgage rates were unchanged over the last week, according to Wednesday’s update on the MBA index. At 7.31%, the average 30-year fixed remains the highest in decades.
On the bright side, mortgage applications rose for the first time in more than a month, and the purchase index, which dropped to the lowest since 1995 last week, increased 2%.
“Purchase applications increased but were still 27% lower than a year ago, as elevated mortgage rates and tight housing inventory continue to weigh on home buying activity,” MBA VP and deputy chief economist Joel Kan remarked, reiterating familiar market dynamics.
It’s possible, the NAR’s Yun said, that we’ll see “further increases” in pending home sales “in light of the fact that many people have lost out on multiple home- buying offers.”
Meanwhile, a quick check on Redfin’s always interesting news and analysis section found Dana Anderson documenting the latest trends in investor activity.
Recall that investors swarmed the market during the pandemic boom, exacerbating the affordability crunch for families. Investor purchases plunged 45% in Q2, Redfin said. That was the most since 2008 with the exception of Q1, when they fell by nearly half.
Investors’ share of the overall market is now down to 16%, consistent with pre-pandemic levels, but still double the share from 20 years ago.
Anderson’s assessment was refreshingly straightforward. “Stubbornly high home prices and mortgage rates, limited inventory and widespread economic uncertainty have dampened housing demand and suppressed overall home sales,” she wrote Wednesday, noting that those factors “are an even bigger deterrent for investors, because they’re in it purely for the potential to make money.”
In Q2, investors bought just 50,000 homes, the fewest of any Q2 going back seven years excluding the pandemic.
Some reasonable investors are buying duration. (I’m not one, but their arguments seem plausible.) If you’re willing to buy duration here, and you have ample cashflow, it’s not a huge stretch to be willing to buy a house at 7.5% here, at least a I need somewhere to live kind of house rather than a I am a house flipper kind of house. Highly levered, tax advantaged, effectively subsidized, non-recourse, supply-limited . . . there’s merits.
As a matter of policy, why don’t we just forbid any entity from owning more than two single family dwellings? If we think home ownership is so importanthat we base our tax code around it, then surely we can take other measures to make home ownership more accessible to people.