Today the NAR reported that existing home sales were up 2.5% % from June to a seasonally adjusted annual rate of 5.42 million in July. Sales were also up 0.6% from a year ago.
In 2018, I wrote:
“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.”
The prediction above was made even with my mortgage rate forecast going down this year.
“For 2019, I am sticking to my call that the 10-year yield will channel between 1.60% to 3%. If world trade gets weaker, we could see the 10-year yield with a 1% handle again.”
With 7 months of data in for 2019, we are trending a tad above 5,270,000 with inventory rising a little year over year in total. However, inventory was down in this report on a month to month basis and year over year a tad. This looks perfectly in line with what I was looking for. In fact, we are really toward the upper range of my sales trend forecast. My negative growth forecast for existing home sales in both 2018 and 2019 and rising inventory doesn’t surprise me. Some people believe that lower mortgage rates haven’t boosted housing demand. I would have them look at sales trends for new and existing homes toward the end of 2018 and compare that data to now to see how lower mortgage rates helped.
From now until January 2020, we have favorable comps to beat on a year over year basis for existing homes if sales trends just stay the same. As always, please take any positive year over year data lines in the context. This is only happening because last year’s data got weak, don’t overhype the housing data. However, any monthly print over 5,300,000 is a solid beat from my eye.
From the NAR:
Total existing-home sales1, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums, and co-ops, rose 2.5% from June to a seasonally adjusted annual rate of 5.42 million in July. Overall sales are up 0.6% from a year ago (5.39 million in July 2018).
Everything looks right to me. I have to remind my readers that housing is always plagued by two houses. They either overhypes short-term data to up and to the downside. We either have super housing bulls or bears, but the actual game was in the middle, which I know isn’t sexy to report.
The reality is that 2019 is already going to be another good year. As long as you maintain a realistic approach to demand. Purchase application data is at cycle highs, but the rate of growth during the heat months year over year was only trending at 3.7%.
From Doug Short:
We are pushing slight growth on a year over year basis now. The comps are going to be very favorable to show growth for the rest of the year.
Overall sales are up 0.6% from a year ago (5.39 million in July 2018). #NAREHS
The number of cash buyers as a percentage of sales rose in this report to 19% from 16% from last month’s report but is down year over year.
Housing inventory fell slightly month to month and year over year. As demand picks up inventory falls. When demand gets weaker, inventory rises. On-trend inventory is up this year in total but only slightly. If we had a significant affordability crisis nationally, inventory would be skyrocketing.
While sales are still trending negative in 2019, and inventory is up the existing home sales market is healthy. The figure in today’s report is a legit beat in my mind. If one maintains a realistic outlook on the current state of housing economics, then the lack of growth in existing home sales shouldn’t be a surprise. Demand from mortgage buyers during the years 2008 to 2019 has been and will continue to be slow and steady with record-breaking demand from cash buyers. Growth in the U.S. housing market hinges on increasing the number of mortgage buyers while cash buyers remain stagnant or fall. The question for the future of U.S. housing economics is if housing tenure will begin to decline when birth rates grow in the years 2020-2024.
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