BC/AD Data: Existing Home Sales

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A few weeks ago, I wrote this about today’s existing home sales report on HousingWire.

“The housing reports for March that will be public in April hang in purgatory as strange hybrids of data from before the coronavirus and after the disease shut down the U.S. economy.  For this reason, the next existing home sales report from March will not tell you the current story for housing.”

Housing isn’t as doomed as it may seem – Here’s why

Today’s existing home sales report is still more about the BC era (Before Coronavirus) with a touch of AD (After the Disease).

From the NAR:  https://www.nar.realtor/newsroom/home-sales-increase-year-over-year-despite-expected-monthly-march-sales-decline-due-to-impact-of?

“Total existing-home sales,1 https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 8.5% from February to a seasonally-adjusted annual rate of 5.27 million in March. Despite the decline, overall sales increased year-over-year for the ninth straight month, up 0.8% from a year ago (5.23 million in March 2019).”

NAR Research
@NAR_Research

Despite the decline, overall sales increased year-over-year for the ninth straight month, up 0.8% from a year ago (5.23 million in March 2019). #NAREHS 
April YoY Sales

From Doug Short: 
https://www.advisorperspectives.com/dshort/updates/2020/04/21/existing-home-sales-wane-in-march-due-to-covid-19

April EHS

Purchase application data was still showing double-digit growth up until March 18th, and then lockdown protocols took place.  After that, we saw declines in -11% -24% -33% and -35%.

I still believe we will see declines of 54% year over year pon the purchase application data.
MBAApr152020

My best advice is to kind of ignore March, April, and May housing data because of lockdown protocols you won’t get a real sense of what is going on in the housing market median to long term. Wait until July 15th, right before the June existing home sales report to start to gauge how much damage Covid19 has done to sales. Remember, we won’t be in lockdown protocols forever. Before this virus attacked our country, home sales were at cycle highs for both new and existing home sales, and housing starts were up near 40% year over year in February.

Regarding home price growth, 8% year over year, growth is way too hot for my taste. The best housing data line I saw last year was that real home prices went negative year over year. You want to see cooling down on home price growth, so root for negative real home price growth again in 2020.

Case Shiller lags a bit, but you can see that real home prices were heading higher again, and we have had 2 months of 8% median sales price growth year over year. Not good!

April Real Home Prices YoY Log

Inventory levels should rise as it takes longer to sell a home, but please don’t assume that 2020 is going to look like 2008 regarding high-velocity inventory increases. Remember, inventory started to increase in 2006 before the Great Recession happened in terms of Monthly Supply.

Nar 2006

Not the case today

NAR Research
@NAR_Research

Unsold inventory sits at a 3.4-month supply at the current sales pace, up from 3.0-months in February and down from the 3.8-month figure recorded in March 2019. #NAREHS 
April Monthly Supply NAR

Ralph does good housing work and is a must-follow on Twitter. As you can see below, total inventory levels are at all-time lows. With housing tenure at 10 years plus and the forbearance programs in place. I would move your large scale inventory thesis in 2021, not this year. However, once lockdown protocols are removed, my housing bubble crash friends, track weekly purchase application data closely because if we start to see increased from the bottom. My advice is too quickly remove your 35%-65% national home price crash thesis off.

Ralph B. McLaughlin
@HousingRalph

As far as my records go, this is the lowest March housing inventory on record at 1.5. million homes for sale.

April Inventory

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.