Before the year started my forecast for existing home sales was in a range between 4,920,000 – 5,290,000. Existing home sales for the previous year were 5,340,000. I also forecast more negative prints, year over year, for 2019 than 2018 on the purchase application data.
“I am looking for sales to trend flat to negative between 4.92- 5.29 million with slightly more inventory in 2019, but not a dramatic difference.”
“We are at risk for more negative year over year prints in the purchase applications data in 2019.”
Purchase application data is not a good predictor of percentage growth in the existing home sales off its own data line. However, it does give good sense of direction for sales if you only consider moves of +/- 20% year over year. In 2014, when existing home sales were negative, year over year, purchase applications were trending down 20% year over year. In 2016 we had 25%+ growth in the heat months between 2nd week of January to the first week of May. That year had the best internal growth data for the existing home sales market as sales grew as cash buyers fell. 2019 purchase application data look just ok so far and that is just fine in my book with my forecast.
We have had more negative year over year prints this year than all of last year,. And Spring has just started. Last year we had positive prints 10.5 months of the year and only 2 real negative prints, year over year, outside of the heat months. The rest of the data was roughly flat for the year. This year we have had more negative prints than in 2015, 2016, 2017 and 2018 combined during the heat months. But these do not foretell a big decline in sales. We will see a moderate decline at worst, especially if cash buyer volumes fall, which should be the case again.
On the bright side, we have had 7 positive prints year over year but these are not showing much growth, especially compared to the earlier double-digit % growth prints. However, growth is still growth but we are trending at 1.75% year over year growth the last 4 weeks.
Here is the scorecard for 2019:
7 Positive Prints this year on a year over year basis
3 Negative Prints this year on a year over year basis
Still this index is trending at cycle highs (1998) levels and the growth trend are intact from the lows of 2014.
The data looks ok, I am still looking for existing home sales to fall a tad year over year with inventory rising but nothing to dramatic. We should see some flat to negative real home price prints on a year over year basis on the Case Schiller index as well but nothing negative on the nominal side of the data line.
Existing home sales is coming up and January wasn’t a good print to some even though it was still in my sales range for 2019. January was wet and cold so we should see a recovery in the month of February but don’t over read too much in this report coming up as much as we shouldn’t read too much in January, March, April and June will be better reads on the existing home sales data.
We even saw a bounce in California sales in February but like existing home sales the comps are hard the first half of the year and should be showing negative year over year growth. After July, the comps get a lot easier and we could even see some growth year over year especially toward the end of 2019.
All in all the purchase application data looks just ok. As long as existing home sales stays between 4,920,000 and 5,290,000 on a sales trend basis which I believe will be the case, it looks just right to me. If cash buyers do hold up volume wise, you could see some prints above 5,290,000 just not many.
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