Existing Home Sales vs New Home Sales: 2016


Demand for Existing Homes:

Demand for existing homes this year, looks positive, year over year.  Sales are now 11% higher than a year ago – the largest year-over-year gain since July 2013.

NAR Report: http://www.realtor.org/news-releases/2016/02/existing-home-sales-inch-forward-in-january-price-growth-accelerates

Sales are now 11% higher than a year ago – the largest year-over-year gain since July 2013 (16.3%).

Exiting home sales

Purchase Applications:

Another positive sign for the existing home sale market is the 27% year over year growth in purchase applications reported today. The heat months for this index are from the 2nd week of January until the 1st week of May. After that, the numbers have less value in terms of gauging total existing home sales for the calendar year. We have had a number of 20% plus, year over year prints for the purchase applications each week this year.

From Calculated Risk :



While 27% growth in purchase application doesn’t mean a 27% growth in sales, it still is a sign of a better year over year market. Last year  we saw 20% growth in purchase applications along with a decrease in the number of cash buyers.  In 2015  sales grew, year over year, from 4.90 million to near  5.3 million. But not all mortgage demand is captured by these numbers. For example, last year we never broke above the 2013 highs in purchase applications but we clearly had more mortgage buyers last year than in 2013. So, demand is probably marginally better than the data shows.

While mortgage demand is soft  in this cycle, the modest headline numbers have been boosted by an abnormal number of cash buyers taking advantage of the distress inventory.  In this way, 2016 is a repeat of 2015 with growing numbers of mortgage buyers and no growth in the number of cash buyers. Having said that, the market is still 26% cash buyers in January. I expect 2016 to show and overall rate in the low 20%  level for cash buyers with at least some prints under 20%.

.From Doug Short



To those who say low inventory is preventing growth in home sales, we had good year over year growth  in existing home sales but inventory is lower, year over year.


Housing inventory increased 3.4% to 1.82 million existing homes. Unsold inventory is at a 4 month supply.

Chart: Supply of existing homes for sale in the US at pre-recession lows –

NAR Inventory

Chart: Supply of existing homes for sale in the US at pre-recession lows –

Inventory LOGAN
It’s all about the housing demand and we have more demand this year than last.  The annual months of inventory was higher during 2012-2015 than in any period from 1999-2005. Look for this to be case again in 2016. It’s a false narrative that low inventory is holding back demand.  There’re  plenty of homes to buy and if American’s can afford to buy them.  But housing isn’t as affordable as the pundits have claimed over the last 7 years.

Selling Equity still remains an issue.   Homeowners simply don’t have enough equity to sell their home and move up. I discussed this issue last year in this article:

Housing Debt Still Haunts Some Move Up Buyers


Affordability isn’t as rosy as everyone makes it out to be. Existing homes continue to provide better value than new homes, which are priced almost as a luxury item.


Today’s New Home Sales Report:

“Sales of new single-family houses in January 2016 were at a seasonally adjusted annual rate of 494,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.2 percent (±13.5%)* below the revised December rate of 544,000 and is 5.2 percent (±12.6%)* below the January 2015 estimate of 521,000”

Report Here: http://www.census.gov/construction/nrs/pdf/newressales.pdf

From Doug Short:

Home-Sales-New-population-adjusted (2)

There was an 82% correction for new home sales from the peak of the housing bubble to trough of the great recession. As you can see from the chart above, the move from the bottom does not yet indicate booming demand for new homes.

In this, the 8th year of economic expansion with rising inventory and rates under 4%  we still have historically low total new home sales and a negative year over year print in the first report for the year. Existing home sales, on the other hand, have shown clear growth even with lower inventory. I expect 4%-8% growth in new home sales with some upside if smaller priced homes come into the market. Today I was asked on twitter if new home sales have peaked? I believe new homes should be able to grow, albeit, slowly because the current sales of 500 K is still recessionary demand  on a historical level. Since the new home market place is a 90% mortgage market place, the super low rates gives the market place some cover for demand to grow.

From Calculated Risk
NHS20152016Jan (3)

The gap in prices between new and existing homes is large. Because interest rates are low, housing pundits are claiming that new homes are very affordable. But buyers disagree.  The demand for new homes has been mild, even with historically low rates. No, new homes aren’t very affordable.

The builder stocks have taken a much needed beating as they were clearly over valued last year. Something I warned about last June on CNBC

“Home Builders, New Homes Sales And The Affordability Myth”


However, now, as some builder stocks are back to 2013 pricing, they present better value with the higher volume sales comps to 2013 pricing.

So far slow and steady growth in the works for 2016 for exiting homes! For new homes, lets wait and see what the next few months bring. We have to be mindful that headline new home sales up and down can be volatile. The last 3 months of 2015 had upward revisions, lets wait to see after 4-6 months what the revisions look like for 2016.

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