Curses, Foiled Again: Continued Bounce in Existing Homes Sales Seems Unlikely

Existing home sales rose in October. Economists expect the bounce to continue, but data says it's unlikely.

On November 21, I reported Existing Home Sales Rise First Time in Seven Months.

Curses, Foiled Again

Economists expect a continued bounce in existing home sales in November, but Mortgage News Daily reports Pending Sales; Foiled Again!

Analysts had expected to hear that pending home sales had a good run in November, perhaps even breaking its 10-month streak of year-over-year declines; Econoday went so far as to predict "A big bounce back is the forecast for November pending home sales." Instead, the National Association of Realtors® (NAR) announced that its Pending Home Sales Index (PHSI) was down 0.7 percent compared to October.

The Index, based on signed contracts to purchase existing homes, slipped from 102.1 in October to 101.4. This was a 7.7 percent decline from the November 2017 level, extending the losing streak to 11 months.

The November results were below even the most negative predictions from analysts polled by Econoday. Those ranged from an 0.6 percent to loss to a 2.2 percent gain. The consensus was for an increase of 1.5 percent.

Lawrence Yun Not Concerned

Lawrence Yun, NAR chief economist, sought to put the pending sales data in the most positive light. "The latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates," he said. He added that while pending contracts have reached their lowest mark since 2014, there is no reason to be overly concerned, and he predicts solid growth potential for the long-term.

"Home sales in 2018 look to close out the year with 5.3 million home sales, which would be similar to that experienced in the year 2000," he said. 'But given the 17 million more jobs now compared to the turn of the century, the home sales are clearly underperforming today. That also means there is steady longer-term growth potential."

Hello Yun

Excuse me for asking but who can afford a house next year but can't afford one today?

Sales will not pick up unless wages rise sharply while home prices decline sharply. Heading into a recession, that still hardly anyone sees, the odds of a sharp increase in wages seems highly unlikely.

Mike "Mish" Shedlock

Comments (4)
No. 1-3
Carl_R
Carl_R

In order to remain at the same level of "affordability", home prices need to move inversely to interest rates. For the payment to remain the same, when rates rise from 4.6% to 4.8%, the price of a $250,000 home must fall to $244,000.

Your chart shows that in the last 2 years mortgage rates have risen from 3.5% to 4.85%. Have homes that were $400,000 in October of 2016 fallen to $340,000? They would have had to fall that much to keep the payment the same. It is inevitable that if sales prices don't fall, sales volume will.

2banana
2banana

Turn those ZIRP, bail out, TARP, HARP, stimulus and QE machines back on!!!

DFWRealEstate
DFWRealEstate

Pending sales for December should be interesting. Hard to see buyers rushing to snatch up homes with their 401K balances circling the drain. The housing market has become a hot mess of hyper financialization.