The housing market was set to outperform my estimates this year. Pending home sales even with a few weeks of lockdown protocols in place still was able to show a 2.4% growth month to month working off an existing home sales report that was at a 13 year high. Also, another report that questions, “We have no homes to buy crowd after any missed sales report.”
From The NAR:
The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, grew 2.4% to 111.5 in February. Year-over-year contract signings increased by 9.4%. An index of 100 is equal to the level of contract activity in 2001.
3 things to remember here
1. It’s all about lockdown protocols and when it happened. March 12th was the first government lockdown order of gathering people 50 and more. That day was the last robust jobless claims data we had. Other states joined in later in March with their lockdown protocols. There was time for the housing market to operate freely in the month of March.
2. What has created this stable demand this year won’t be killed off by the virus forever. In time lockdown protocols will be taken off, and the demographic power of having the biggest age group being ages 26-32 will still be here. Once we are free to walk the earth, we need some time to get back to normal activity levels, and then housing should be ok.
3. Some of these pending home sales will be canceled due to the coronavirus fears. Some might be canceled because specific home buyers might not have locked their rates before rates rose quickly in March. We saw this action back in 2013 when rates moved higher quickly, and some buyers didn’t close their deal due to rates. This isn’t a massive event, but for sure, I am keeping an eye out on the cancelation of transactions in March.
As a country, we have a lot of work to do in April! I can’t wait until America destroys this virus, and we are off lockdown protocols.
The next existing home sales won’t have the full negative effect of government lockdown policies, but the month of April will. For now, keep track of purchase application data on a year over year basis and put a giant * on the next three existing home sales reports and most housing data.
We went from BC Before Coronavirus to AD After The Disease, but in time we are going to the AB stage America Is Back.
From Doug Short:
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.