In the past number of months, I have been looking for a rebalancing of new vs. existing home sales. The sharp increase in mortgage rates beginning in 2022 locked many existing homeowners into their houses, since they could not afford the concomitant increase in mortgage payments that would accrue from moving. This depressed existing home sales, but drove up prices due to the very limited supply.The “big” news this morning was that existing home sales made a new 10+ year low at 3.84 million annualized:
But as the above graph shows, this was hardly a plunge. Rather, sales came in at the bottom of their recent 18 month range.But if there was no bright spot in sales, the YoY% change in prices continued to moderate (below graph shows non-seasonally adjusted data):
On a YoY basis, in response to the longer term decline in inventory, existing home prices have risen consistently since 2014, and accelerated during the COVID shutdowns. After briefly turning negative YoY in early 2023, troughing at -3.0% in May, comparisons accelerated almost relentlessly to a YoY peak of 5.8% in May of this year. Since then the YoY comparisons have decelerated to 4.1% in June, 4.2% in July, 3.1% in August, and 2.9% in this month’s report.Meanwhile the inventory of existing homes continued to rise sharply. In August it was 22.7% higher YoY; in this month’s report it was 23.0% higher YoY (below graph shows absolute numbers, not seasonally adjusted):
Last month II concluded my review of both new and existing home sales by saying that “the rebalancing of the housing market is continuing, as lower mortgage rates help in the sales of new homes, which has helped drive down demand somewhat for existing homes, which in turn has led to an abatement in their price increases and an increase in inventory.” This month those trends all continued as to the existing home market. Demand has been driven even further down, despite somewhat lower mortgage rates. This again led to more inventory and a continued abatement in price growth. I expect these trends to continue for awhile. Tomorrow we will see if the slight upward trend in new home sales has continued.More By This Author:Are Corporate Profits Stalling In Q3? A Closer Look At The Recent Elevated Initial Claims Housing Permits And Starts Stabilized In September