Today we got the first AD ( After The Disease) report on Pending home sales, which came in worse than expected, but the trend is not surprising. The previous release had shown growth month to month, but that didn’t really capture the effect of Covid19.
“The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, decreased 20.8% to 88.2 in March. Year-over-year, contract signings declined 16.3%. An index of 100 is equal to the level of contract activity in 2001.”
From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2020/04/29/pending-home-sales-fall-in-march
The previous existing home sales report had a bit of BC (Before Coronavirus) data in it. So expect the next existing home sales report to fall even more on a month to month basis, breaking the year over year growth streak we had even in the most recent report.
One the purchase application data front. We might have found a bottom in terms of the % year over year decline rate. This would be surprising for me because I was looking for this data to fall at least a decline of 54% year over year.
BC Data (Before Coronavirus)
+8%
+17%
+11%
+16%
+10%
+10%
+10%
+12%
+11%
AD Data (After The Disease)
-11%
-24%
-33%
-35%
-31%
-20%
AD averaged -25.6% YoY.
For some reference, in 2014, we trended down 20% year over year, which marked the bottom in this index in the previous expansion. Adjusting to the population, it was the lowest level ever recorded back in 2014. If we indeed have hit bottom already, then we wouldn’t be revisiting that level. I would give it some time before we can confirm that this is the case.
From Calculated Risk:
https://www.calculatedriskblog.com/2020/04/mba-mortgage-applications-decreased_29.html
Recently I did an interview with Michael Batnick on The Compound. One thing that I am really trying to relate this year in my conversations with Wall Street is that the Before Coronavirus housing data was good in 2020. This take is a shot at the mega bears that have been forecasting an epic crash in home prices for 7 years based on ideological takes on affordability, student loan debt, and no economic game at all with demographics.
2020 BC data had cycle highs in existing home sales, new home sales purchase application data, housing starts, and cash buyers were trending at its lowest % in years. For those who have followed me for years now, I have always stressed, housing was a 2020-2024 story regarding when we will get to 1,500,000 housing starts, and the purchase application data index would hit 300. We got there before the virus, and if there was one lousy housing data line, it was that the median sales price per the NAR was growing at 8% year over year, which is unhealthy.
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.