For 2017, I predicted no growth in existing home sales, regardless of the size of the inventory, because our demographics at this point don’ support a stronger uptick in home buying.
Even though oil has moved from $26 to over $50, don’t over read the inflation hype, and likewise don’t put too much weight on the low inventory thesis as the reason that the housing market is sluggish.
For 2017, the housing market is just where it should be. We just need to accept that.
In January of 2017, existing home sales hit a cycle high when inventory was at a cycle low. Inventory has been rising since January but demand is not keeping up with that growth in inventory.
Today the national association of realtors released it’s pending home sales report which is now showing a year over year decline in sales.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 1.3 percent to 109.8 in April from a downwardly revised 111.3 in March. After last month’s decline, the index is now 3.3 percent below a year ago, which is the first year-over-year decline since last December and the largest since June 2014 (7.1 percent).
The housing market is exactly where it should be except that cash buyers still make up over 20% of sales. This is something I did not predict for this year as I thought cash buyers would move toward the 16%-19% level.
We should continue to expect slow and steady growth — not record breaking demand!
Expect 2017 to be another year of about 6 million total home sales both new and existing sales added together . And be mindful, that if it wasn’t for the historic high levels of cash buyers, existing home sales in 2017 would never have printed over 5,000,000 sales nor would it ever have printed over 5,000,000 sales in this economic cycle. We cannot escape that mortgage demand is still only back to 1998 levels.
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.Mohtasham