There’s nothing worse for a macro documentarian than a boring, but nevertheless notable, data release.
If it’s boring, it’s usually not notable, which means you can spare readers the trouble. If it’s boring and notable, you have to document it, thereby subjecting the audience to drudgery you’d rather spare them.
It’s with that in mind that US pending home sales were unchanged in November from October, according to data released Thursday. Consensus expected a small gain.
Apparently, an almost singular decline in mortgage rates from the local peaks was insufficient to compel sidelined buyers.
That hints at why I decided to highlight this otherwise uninteresting print: Mortgage rates plunged in November alongside 10-year Treasury yields, and given i) the role of elevated financing costs in pricing out buyers and ii) the associated store of pent-up demand, one might’ve expected pending sales (a leading indicator for existing home sales) to perk up. Alas.
NAR chief economist Lawrence Yun offered some context. “Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” he said Thursday.
Pending sales fell 2.3% in the south and actually rose in every other region. The YoY decline on the index was 5.1%. Recall that existing home sales managed a small gain in November, just the third in 22 months. Thursday’s unchanged read on pending sales doesn’t exactly point to an imminent inflection for purchases of existing properties, but Yun tried to stay upbeat.
“With mortgage rates falling further in December, home sales will improve in 2024,” he said, noting that average monthly payments are around $300 cheaper versus the highs. The latest Redfin data showed the median monthly mortgage payment in the US fell to $2,472 in the four weeks ended December 17, down more than $260 from October’s peak.
Coming full circle, the most notable aspect of the year’s final US housing market release is just that October’s read on the pending home sales gauge marked an all-time low, so November’s unchanged print means the index has now spent two months loitering at the lowest levels on record.
This makes perfect sense though… Mortgage rates have not begin to reflect what has been signaled by the Fed.. Buyers would be silly to lock in a contract now with knowledge that the Fed has signaled cuts or at the very least no more hikes in the near-mid term. Unless you desperately needed to buy right now (or wanted to go through the hassle of refi-ing virtually right after closing on your property), what’s the difference if you window-shop for 3-6 months and then decide?
The same logic is at play as to why higher rates have not been hitting peoples pockets because if you’ve owned a property in the last 5 years would have been foolish not to lock in 30yr fixed rates below 5% given where rates were as there was only one direction they could go from virtually 0.