Spring Housing Flop: Existing Home Sales Decline 2.3 Percent, Inventory Issues Persist
Today, the National Association of Realtors (NAR) reports existing home sales declined 2.3%.
The Econoday consensus estimate for existing home sales was 5.650 million seasonally adjusted annualized (SAAR) in a range of 5.530 million to 5.800 million units. The Census Bureau report came in at 5.570 million, barely above the low-end estimate.
April was not a strong month for the housing sector as a disappointing 2.3 percent decline in existing home sales follows yesterday’s weakness in April new home sales and last week’s weakness for housing starts. But April’s 5.570 million annualized rate for resales is still near recovery highs though the year-on-year rate reveals how moderate conditions are, up only 1.6 percent.
The report’s two components fell in the month, down 2.4 percent for single-family homes to a 4.950 million rate and down 1.6 percent for condos to a 0.620 million rate. The 1.6 percent reading is wild in this report with both single-family homes and condos at a year-on-year 1.6 percent.
But there are positives in the report including prices where the median rose 3.5 percent to $244,800 for a 6.0 percent year-on-year gain that, however, looks rich relative to sales but is tracking right at separate data compiled by FHFA and Case-Shiller. Supply, which has been very depressed, is also another positive, up 7.2 percent in the month to 1.930 million on the market. Sales relative to supply improved to 4.2 months from 3.8 in both March and February.
Regional separation in April’s data is marginal with the Midwest leading at a monthly gain of 3.8 percent and the South behind at minus 5.0 percent. But the South does lead the year-on-year list, at plus 3.6 percent with the Northeast at the tail-end with a 2.7 percent decline.
The Spring selling season has gotten off to a slow start for the housing sector, a likely reflection of consumer caution and pointing perhaps to less strength than expected for the second-quarter economy.
Inventory Issues Persist
Existing homes declined in April, falling back by 2.3 percent in April when compared to March 2017 levels.
Single-family home sales decreased 2.4 percent to a seasonally adjusted annual rate of 4.95 million in April from 5.07 million in March, but are still 1.6 percent above the 4.87 million pace a year earlier. Existing condominium and co-op sales were down 1.6 percent to a seasonally adjusted annual rate of 620,000 units, remaining 1.6 percent higher than in April 2017.
NAR said sales were held down by a “stubbornly low supply” of homes for sale. This also helped push the median number of days a home was on the market to a new low of 29 days.
Lawrence Yun, NAR chief economist, says every major region except for the Midwest saw lower sales in April. “Last month’s dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market,” he said. “Demand is easily outstripping supply in most of the country and it’s stymieing many prospective buyers from finding a home to purchase.”
Rising Prices and Supply
Econoday cites rising prices and supply as positives. Lawrence Yun, NAR chief economist, says “Demand is easily outstripping supply in most of the country.”
How long can Yun’s silly argument go on?
There is not a supply shortage. Rather, there is a supply shortage of homes people can afford at which buyers are willing to sell. If homes were priced to sell, more homes would sell.
Despite rising prices, buyers want higher prices than they can get. At some point, rising prices were bound to choke off sales.
It’s too early to conclude a sustainable downtrend in housing has started, but if it has, it would be on top of an overall slowdown in consumer spending led by a slowdown in auto sales.
Here is my estimate of the economic and Fed consensus: Don’t worry, it’s just a temporary soft patch in March, April, and May. The second
quarter half recovery is still on schedule.
Mike “Mish” Shedlock