When existing home sales missed expectations a few months ago, and everyone blamed low inventory, I warned that the same people would not give low inventory the credit (wink) when sales got better. Today the NAR reported existing home sales were at 5,600,000 units, up from 5,540,000 last month but down 1.2% year over year.
For 2018 I expected flat to negative growth so any print over 5,530,000 beats my sales predictions. I still believe we don’t have the right demographic profile for home sales to be strong, selling equity is still an issue for move up buyers, housing tenure keeps on rising and cash buyers should fall this year on a year over year basis.
“For 2018, I anticipate existing home sales to be in the range of 5.27 – 5.53 million units. If we end the year showing negative growth, with rising inventory once again, don’t worry, be happy. This would be “normal” especially when purchase applications are still trying to party like it is 1999.”
Two things that stick out in the existing home sales report released today:
1. The number of cash buyers, which I expected to fall compared to last year, have fallen every single month this year, but still make up 20% of the market. I expected cash buyers to be more in the range of 16%-19% of the market this year.
First-time buyers were 30% of sales in March; Investors purchased 15% of homes; All-cash sales were 20% of transactions; Distressed sales were 4% of sales.
2. Monthly supply of homes are almost flat year over year. It is possible we will see a month that has growth in supply on a year over year basis with negative demand compared to last year. If that does happen, I look forward to watching the resulting hysteria from some the financial community . Supply is rising into the spring just like it did last year but demand isn’t really picking up. In fact the best existing home sales prints in this economic cycle occurred when inventory was at the lowest in the non-seasonal buying period time of the year.
More on the report from the NAR here:
All in all, today’s report is solid, as long as one has a realistic outlook on the current housing economics. The housing cycle from 2008-2019 was all about slow and steady demand from mortgage buyers and record-breaking demand from cash buyers. Cash buyers are starting to fade so we will need better demographics and shorter housing tenure in order to get more mortgage demand.
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
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