The National Association of Realtors (NAR) came out with their estimate of existing home sales number today, showing a slowdown sales numbers for July. The release states that “total existing-home sales…fell 3.2 percent to a seasonally adjusted annual rate of 5.39 million in July from 5.57 million in June.
Existing-Home Sales Lost Steam in July
Some may recall my Housing predictions article published in December 2015 in which I said:
“However, if the market maintains around 20% cash buyers and mortgage buyers stay on trend, we should see some growth in 2016. With all these factors in mind, I predict total existing home sales to be between 5.13 -5.43 million in 2016”
For those numerically challenged this means the seasonally adjusted rate is smack dab in the middle if my predicted range. Total existing home sales growth is still tracking higher so far this year. In the last few months year over year purchase application data growth has fallen from his 25% growth pace in the heat months from the 2nd week of January to the first week of May.
In 2015 we ended the year at 5.3 million existing homes sales so at first glance my prediction looks I was not expecting much growth for 2016 and perhaps negative growth year over year. However, the quality of the existing home buyer profiles look much better in 2016 than any period in this cycle.
In my December article I also predicted the following:
“I believe we will see for the first time in this cycle, monthly prints of less than 20% cash buyers on some reports, which is still very high on a historical basis but a double digit decline from the 2010-2014 trend”
Today’s report bears this out.
“All-cash sales were 21 percent of transactions in July, down from 22 percent in June, 23 percent a year ago and the lowest share since November 2009”
We don’t have a booming demand housing market and we won’t have one until years 2020-2024. However, demand is growing slowly. This cycle is working off very low sales numbers. Slow and steady is the appropriate call for this cycle. Cash buyers are falling as distress supply falls, so the future of the housing market will have to be sustained by more mortgage demand, unlike previous years when existing home sales had soft growth in mortgage demand but higher levels of cash buyers. Mortgage demand this year, during the heat months, showed 25% year over year growth. This translates to only a couple of hundred thousand more homes sold at best, compared to last year. Be mindful that even with the cycle highs in mortgage demand we are only back to 1998 levels with cash buyers at 11-15% above their historical norms for 2016..
From Doug Short:
Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data daily on his own facebook page https://www.facebook.com/Logan.Mohtashami