Today I was interviewed by Lisa Abramowicz and Pimm Fox on Bloomberg Financial regarding today’s existing home sales data and President Trump’s immigration policy.
I was addressing the bloomberg article below: Why Trumps immigration crackdown could sink U.S. home prices
You can hear the interview here
In the interview I expressed my concern that mortgage purchase application data has been misinterpreted for years now. The decline in mortgage applications is primarily due to the decline in refinancing activity from last year, not the decline in purchase applications as occurred in 2014 when existing home sales were negative year over year and new home sales missed it’s estimates by 20% and almost were negative, as well.
In order to appropriately interpret mortgage purchase application data, one should only considerthe year over year comparisons from the 2nd week of January to the first week of May. Those are the heat months for housing. After May total volumes fall.
Last year we saw 25% + growth in the heat months and this year we are seeing single digit growth. So, we are still seeing growth but not at the pace of last year. We are heading for cycle highs in demand but still will only be back to 1998 levels. Context is always key when talking about housing data in this cycle.
2. Existing Home Sales
Regarding existing home sales, stop me if you already heard this joke… Existing home sales missed estimates because inventory is low.
Today, existing home sales hit a cycle high with low inventory. Existing home sales also hit a cycle high last year when inventory was at a cycle low. Those who blame tight lending and low inventory for their missed assumptions on sales simply don’t understand the data in context to sales. In this housing cycle ( 2008-2019) we simply don’t have enough qualified home buyers to have a real recovery. It is not tight lending and it is not low inventory. In fact, if we didn’t have the extra 12%-20% of cash buyers (above historical norm) then the total existing home sales number wouldn’t be printing much over 5,000,000. For 2017 I am looking at peak existing home sales to come in at 5.45 million, assuming cash buyers fall again and mortgage buyers grow. Today’s number was a monster beat in my eye at 5.69 million. Cash buyers were stronger than I thought running at 23% of the market as I am looking for teenagers prints all year. If this trend of above 20% cash buyers continue with slight growth in mortgage buyers we have another cycle high in existing home sales in total with low inventory.
The take-home lesson here is that when inventory rose in 2014, existing homes sales and purchase applications declined or went negative, year over year. Now the purchase applications are positive for 2 years and sales are up as well. Just the Facts Ma’am. It’s about demand not supply.
Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. 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