Existing-Home Sales, 10-Year Yield, Coronavirus & Boeing Impact

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In 2019 I wrote:

“For 2020 I am looking for sales to stay with a range of 5,210,000 – 5,470,000”

https://loganmohtashami.com/2019/12/28/2020-economic-housing-forecast/

Today the existing home sales came in at 5.46 million with inventory falling on a year over year basis as, apparently, we had homes to buy when we were told we have no homes to buy.

From the NAR:

Total existing-home sales,1https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.3% from December to a seasonally-adjusted annual rate of 5.46 million in January. However, for the second straight month, overall sales substantially increased year-over-year, up 9.6% from a year ago (4.98 million in January 2019).

Today is going to be the last day for a carefree year over year comps as previous year sales were at a recent multiyear low. However, sales did close at the upper end of my sale range, so this is a near beat for me on 2020 sales.

NAR Research
@NAR_Research
For the second straight month, overall sales substantially increased year-over-year, up 9.6% from a year ago (4.98 million in January 2019). #NAREHS

Feb Existing Home Sales
The Coronavirus and the Boeing situation is a real factor for housing this year as these two events are significant drivers of lower yields.

In fact, in this article I wrote for HousingWire recently, I explained how growth can be impacted by these two things, and it wouldn’t be out of the norm to have a negative or sub 1% GDP print due to these two events

“Short term economic events can lead to a negative GDP print. Three times during this record expansion, GDP prints were negative for a quarter. This occurred twice in 2011 and once in 2014. A negative GDP, combined with these headlines, could drive rates to recent all-time lows on the 30-year fixed rate.”

From Boeing to Brexit: 7 major storylines that could send mortgage rates even lower

The other side to this is that a lot of economic data has gotten better pre Coronavirus and Boeing. Now, Boeing should be back online in the 2nd half of 2020. So for now, as long as China is dealing with the Coronavirus, the 10-year yield can break to all-time lows.

Lower rate of growth always drives yields lower. However, 2020 is the 4th time in this record-breaking expansion that an event drove yields below 1.60%.  Out of all the reasons, the 10-year yield went below 1.60% Boeing and China together is the most legit economic factor. The others were just short term events that caused yields to breakdown, hence why the recovered back higher later quickly. If China and Boeing are fixed immediately, the downside on yields is limited, like every other time in this expansion.

1. 2012 European Bond market scare caused some to speculate that Spain would default.

2. 2016 Brexit scare, that was overkill.

3. 2019 Trade war tap dance and the inverted yield curve

Once this horrific event is over, pretty much any U.S. recession case is out the door as a lot of economic data got better pre coronavirus. The bears are growling like hell hounds right now because that is what they do. Oddly enough, I used to joke that the Gold Bugs really need a plague or outbreak to get their demand shocks that they have been forecasting for. Well, now they have it.

Coronavirus, Gold Bugs & Stock Traders 

https://loganmohtashami.com/2020/02/20/coronavirus-gold-bugs-stock-traders/

However, for housing data. All in all, a good start for housing in 2020. Existing home sales are up year over year. The purchase application data has shown double-digit growth during the heat months in the last 4 weeks. Housing starts are up 21.4% year over year, and permits are at cycle highs. The slow but steady housing cycle continues. 

From Calculated Risk:
https://www.calculatedriskblog.com/2020/02/mba-mortgage-applications-decreased-in.html
MBAFeb192020

From Doug Short: 
https://www.advisorperspectives.com/dshort/updates/2020/02/19/new-residential-housing-starts-inch-down-in-january
Feb Housing Starts vs pop

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2020/02/21/existing-home-sales-declined-in-january
Feb Existing Home Sales For Jan

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 Facebook page https://www.facebook.com/Logan.Mohtashami and is a contributor for HousingWire.

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