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.”
As of today, we are trending at 5,308,888; this is still a total negative growth for the year, but the trend is getting a lot better.
Try not to read too much into a month to month housing data line in the context of extrapolating a big macro theme. Initially, the response I saw from the media and twitter finance that something went wrong in this month’s report.
Let me break some news out for everyone. Not much is happening in the housing market for existing-home sales that would warrant a significant change in thinking. The V shape recovery we are seeing in housing this year is only due to the weakness we saw in late 2018. That weakness was only due to a lack of marginal buyers not buying homes when rates were higher. This time around, we are seeing just a minimal comeback from buyers in 2019 with a significant decrease in rates from the peak of 2018 toward the lows of 2019.
More on that here: Housing V Shape Recovery Complete: Now What?
As always, the new home sales matter more to the economy that the existing home sales market. The new home sales market is acting much better this year, and we can start to forecast flat to slightly positive growth in housing starts next year. Still, housing starts the year to date and is negative.
One last reminder. If certain people say, sales were down this month because of no homes to buy. Our best sales prints of this cycle all came in fall and winter with inventory lower than what it is today. Don’t fall prey to this line of thinking. Now on to the report.
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, fell 2.2% from August to a seasonally adjusted annual rate of 5.38 million in September. Despite the decline, overall sales are up 3.9% from a year ago (5.18 million in September 2018).
Everything looks right to me; in fact, it looks better! 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%.
Year over year comps is going to be easy to beat until February of 2020. This is a positive for the housing market but take this data line in context to where housing was late last year.
One of the things that I have been waiting to see for years is that cash buyers as a % of sales fall in between 16%-19% of sales. We have had a few reports recently showing below 20% cash buyer sales data.
While sales are still trending barely negative in 2019, 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 total 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, which are now falling as a % of sales under 20%. 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.
The economic throwdown rematch will be happening this year on November 5th, and Dr. Jessica Lautz from the National Association Of Realtors will be part of the panel this year.
Tickers are available now: https://www.eventbrite.com/e/economic-throwdown-the-rematch-tickets-74968347345?aff=ebdssbeac
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