Housing data will moderate, but don’t freak out when this happens!
This has been my theme recently as many housing data lines short term looks way too hot to be normal. At some point, like with most economic data, we will work from a more normalized trend. At that point, we can make a better judgment on where the real trend is. Bearish housing twitter has been terrible for a long time, and 2020 stamps this crash cult group as one of the worst conspiracy theory economic troll groups ever. When housing data is trending poorly, it’s not that hard to see in the data. I talked about this recently on Housing Wire because bearish housing people in America are more grifters begging for attention.
https://www.housingwire.com/articles/beware-of-housing-market-crash-headlines/
Today’s pending home sales report isn’t the moderation I am talking about, it’s still showing me more of the make up demand from the lost months due to Covid19.
From the NAR: https://www.nar.realtor/newsroom/pending-home-sales-dip-1-1-in-october
- Pending home sales declined slightly in October, slipping 1.1% from September. Only the South had month-over-month gains.
- Nationally, contract signings are up 20.2% compared to a year ago.
- All regions experienced double-digit year-over-year increases.
It is still trending over 20% year over a year, working with much harder comps as housing data got a lot better in the 2nd half of 2019. One thing to remember that gets forgotten a lot. We have always had our best existing home monthly sales data in the fall and winter in housing in the previous expansion; 2020 is no different outside the fact that February of 2020 should have given everyone a clue that housing was breaking out this year. If Covid19 wasn’t here, existing home sales should have ended the year between 5,710,000 – 5,840,000 that is a noticeable jump from 2019 levels that were roughly 5,300,000. If we don’t hit those total levels this year, this means we are still making up for a lost time; that is how powerful that February existing home sales report was for me. The first real breakout in the existing home sales data in years and 2020 should be the most significant in sales data on a year over year basis during the years 2020-2024. This is primarily due to 2019 sales being flat.
Remember, don’t think of housing as a boom in sales growth but very stable during the years 2020-2024. The thing we should worry about the most is actual real home prices taking off in an unhealthy way. I addressed this issue on Housing Wire today.
https://www.housingwire.com/articles/the-downside-of-the-hot-2020-housing-market-rapid-home-price-growth/
As long as you see year over year growth in housing data, we are still good, and remember next year we all have to adjust the year over year data due to Covid19 as some of the data will show too strong of a year over year growth because of the weakness due to Covid19. However, today’s pending home sales data was another solid housing data, and no, we have no cracks in the system.
From Advisor Perspectives:
https://www.advisorperspectives.com/dshort/updates/2020/11/30/pending-home-sales-dip-in-october
Logan Mohtashami is a Lead Analyst for Housing Wire, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987.