Today the National Association of Realtors (NAR) reported on existing home sales. Their number came in at 5.36 million, a slight miss on what they predicted.
The trend in existing home sales for 2015 has been a slow and steady rise from the low bar set in the previous year. Here is a look at existing home sales from in this cycle:
The dip in sales in 2014 set the stage for comparatively stronger sales in 2015. I predicted total home sales to be between 5.0 – 5.20 million this year. The current trend suggests sales could even be slightly higher than that, between 5.18 – 5.34 million in total existing home sales.
In a larger context, the housing purchase demand hasn’t been very strong from mortgage buyers but it has been very strong from cash buyers.
From Professor Anthony Sanders
Purchase applications in 2015 have had year over year gains, due (again) to the low bar set in 2014. In fact, 2014 had the weakest total print on purchase applications in in 20 years. 2015, thus far, however, has not exceeded the 2013 highs. We do have more mortgage buyers this year compared to 2013 — which had a higher percentage of cash buyers. Total existing home sales that year ended at 5.09 million. A case can be made now that their is economic data slippage is in the purchase application data now, on a marginal basis only. We have more mortgage buyers this year than in 2013 but the data isn’t reflected in the purchase application data line.
When we put these numbers in context with this century, total home sales in this cycle have had the highest percentage of cash buyers, 15%-20% above historical norms. Headline sales, adjusted to population, aren’t that strong compared to year 2000 when rates were at 8%, when we had a lower working and headline population. If you discount the extra cash buyers in this cycle, it shows the soft demand curve for housing in this cycle from main street America.
In summary in 2015 we observed the following: Grade: B 83%
- Year over year growth, which isn’t say much but still growth.
- More mortgage buyers, fewer cash buyers and growth in total sales. This is the biggest net positive for housing in 2015.
- Inventory is still low, most likely due to the lack of selling equity. See:
- Purchase applications consistently grew, year over year 10%-20%, in the weekly reports. However, 2015 will be the 2nd worst year on record when the numbers are adjusted to population.2016: Existing home sales and purchase applications in 2016 will be very interesting, since the low bar factor has diminished. The expected Fed rate hikes don’t necessarily mean long term rates will go much higher from where they’re today.
Have a wonderful Thanksgiving to all!
Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988 and is in a partnership with ZeneHome.com