Surprise, surprise: Existing US home sales defied expectations for another decline to post a solid increase in data released Thursday.
On the heels of the worst drop since November of 2022, resale activity posted a 4.2% increase in February, the best showing in a year.
Consensus expected a 3.2% decline. Sales have now logged increases in four of the past five months.
The annual pace, at 4.26 million, was the second-quickest in 12 months on the NAR’s series.
The upside surprise counted as a reprieve from otherwise dour data emanating from a US housing market still bedeviled by high prices and elevated borrowing costs.
Mortgage rates rose for the first time in months over the last week, according to the MBA’s gauge, which put the average 30-year fixed at 6.72% in Wednesday’s update, up five basis points from the prior week. That hit refis, but purchase apps managed a small gain to a six-week high.
“Overall, purchase application volume is up 6% compared to last year at this time,” MBA chief economist Mike Fratantoni remarked, citing “growing inventories of homes on the market” as we enter the spring home-buying season.
On Thursday, NAR chief Lawrence Yun echoed Fratantoni on supply. “More inventory and choices are releasing pent-up housing demand,” he said, adding that “home buyers are slowly entering the market.”
The NAR’s data showed total housing inventory was up more than 5% at the end of last month from January, and 17% from the same period last year.
Prices remained high. That goes without saying. The median existing home sold in February went for $402,500, up from $398,100 in January. These are Cullinan numbers.
The annual price increase was actually the slowest since September, though, at 3.7%. It was the 20th consecutive YoY increase.
Yun went on to note that the overall value of home equity in America rises by roughly $350 billion for every one percentage point gain in home prices. Do the math and “that means a gain of nearly $1.3 trillion in home value appreciation at a time when the stock market is undergoing a correction.”
The implication: The negative wealth effect from the recent pullback on Wall Street was offset by rising home prices.
What can you say? It’s nice to own property. In the immortal words of a true American hero: “It is so choice. If you have the means, I highly recommend picking some up.”
Sellers are anxious. They are forward looking, and afraid that if they don’t unload their property now, they’ll never be able to escape from the U.S.
Don’t forget the wealth effect of hundreds of billions of dollars in interest from government bonds too! For as much as we listen to the Fed or economists talk about increasing interest rates to tame inflation, I’d argue higher interest rates alongside housing gains are highly stimulative.
When interest rates went through the roof in the early 80s, the public debt to GDP was only at 30%. Now it’s 4 times that. Even if we still had the stability of an economy run by the Democrats, I’m not convinced higher interest rates are effective as a way to tame inflation given the circumstances. $350B in wealth gains is tame in comparison to the trillion dollars of interest paid every quarter on US debt (I know they pay some of that to themselves).
All that to say, tax the wealthy and lower rates – maybe then we could get out of this mess.
More like golden handcuffs for more folks than people think. Better to sit on my sub-4 mortgage and equity that I most months can comfortably afford, than to join the other shlubs ( no disrespect) trying to be cute selling my home to buy something else, but in most places I only get the tax benefit on my cap gains if I buy up.
I’m good.
The only people buying right now are are those who absolutely have to for one reason or another.