Existing home sales bounced 5.1% from February’s steep decline of 7.3%, originally reported as -7.1%.
Sales came in at a 5.330 million seasonally adjusted annualized rate (SAAR), better than the Bloomberg Econoday consensus estimate of 5.286 million.
Highlights
Existing home sales rose more than expected in March, up 5.1 percent to a 5.330 million annualized rate that, however, fails to reverse a downwardly revised 7.3 percent drop in February. And the year-on-year rate, at only 1.5 percent, is decidedly weak. But looking at the first quarter as a whole, which is important for housing data given their volatility, existing home sales are up a much more respectable 4.8 percent.
March’s gain is led by the most important component, single-family homes where the rate rose 5.5 percent in the month to 4.760 million. Year-on-year, single-family homes are up 2.6 percent. The showing for condos is less convincing, up only 1.8 percent in the month for a year-on-year decline of 6.6 percent.
Prices in this report are up, a monthly 5.0 percent for the median for a year-on-year rate of plus 5.7 percent which closely tracks rates in FHFA and Case-Shiller data. The median price for an existing home is $222,700 which, outside of last year’s Spring selling season when the median peaked above $230,000, is the best of the recovery.
Higher prices help pull in more homes into the market, at 1.980 million in March for a sharp 5.9 percent gain from February. Yet year-on-year, supply is still weak, down 1.5 percent. Looking at supply relative to sales, supply is at 4.5 months which is up slightly from 4.4 months in February and down slightly from 4.6 months in March last year.
Regional data are very positive with all four regions showing monthly gains led by the Northeast at an 11.1 percent surge. The Northeast also leads the year-on-year rates at plus 7.7 percent with the West bringing up rear at a 2.5 percent decline.
Realtors are generally upbeat right now and the housing market, though not on fire with weakness still appearing on the new home side, could be poised for a solid Spring season, one that would contribute to a needed pickup in the pace of the overall economy.
Recent History
A 3.7 percent March surge is expected for existing home sales which however plunged 7.1 percent in a February drop that the usually upbeat National Association of Realtors underscored as meaningful. The strength of the jobs market has yet to be reflected in home sales, the result in part of low wage growth. Low supply and only marginal price appreciation have long been negatives in this report.
Housing Flatlining
Yesterday we noted Housing Starts Plunge 8.8%, Permits Plunge 7.7%; Bloomberg Cites “Fundamental Strength”.
Bloomberg’s alleged “fundamental strength” strength was based on easy year-over-year comparisons that will vanish next month.
Housing Starts 2004-2016
Changing Attitudes Explains Housing
Today Bloomberg says “The strength of the jobs market has yet to be reflected in home sales.”
Some of us question the alleged “jobs strength”. People working multiple part-time jobs does not a strong jobs market make.
That said, the real key to the weak rebound in home sales is changing attitudes. Millennials have different attitudes towards debt, housing, and family formation than the baby boomer generation.
The millennials appreciate mobility and flexibility much more than boomers.
Factor in massive amounts of student debt and the fact that unprecedented numbers of children in their late 20s or even 30s still live at home (some need to take care of elderly parents, others cannot afford a house), and one should not expect robust home sales or a huge surge in family formations.
Mike “Mish” Shedlock
“Realtors are generally upbeat now…”
When is that EVER not the case?
If the sales were down 7.3% one month and then up 5.1% the next, they are still down 2.572% overall, yes?
2-month average – yes
Few discuss a growing headwind in owning real estate in many parts of the country, which is the ongoing increases in property taxes. I am personally aware of 50% increases in ten years. In locations like New Jersey assessed value homes in the $300s could see 3% or more in annual tax bills. For my former MA home in 2004 property taxes were $3890 in 2015 they were a tad under $8000. Assessed Value in 04′ $587k today its $543k
2004 Taxes – $3890/12=$324/mnth equivalent to a $55k mortgage payment at 6%
2015 Taxes – $8000/12=$667/mnth equivalent to a $145k mortgage payment at 3.675%
Nearly a 300% increase in debt that my old town can service bond payments with. A few police cars, new fire truck and a whole lot of pensions is where that difference has gone.
Yellen will have a real problem if the mortgage rates rise.
Politicians cannot eliminate any home ownership deductions.
Pension obligations will still come up short.
Eventually as Mish points out there will be many Detroits, Chicagos etc.
Forgive me Mish if I believe they deliberately left the “negative” sign off that number.
Mish – “Millennials have different attitudes towards debt, housing, and family formation than the baby boomer generation.”
They sure do. Some might say they are a more self-centered generation, but I would say they are more “aware”, at least aware of what they don’t want. Quite a few of them don’t even care if they have a car, let alone a house. Even if they could afford a house, they realize that house prices are too high right now, and that after the recession really sets in and prices fall, they’ll lose big time.
They’ve seen their parents struggle, lose their jobs, struggle to get re-educated and then lose there too, daycare, latchkey kids, little family time, divorce, on and on. It’s a treadmill that these millennials want no part of.
More aware, more savvy, more realistic. They’ve seen the lesson, and it’s one they want no part of.
Correct
I have been saying that since 2007 or so
Mish
An unprecedented number of children in their 20’s and 30’s still living with their parents means there is an unprecedented number of people looking to get the hell out, at least into a rental or a condo.
Many will own their parents home when their parents die.
Condo sales way down
And Again, many of these people don’t want to be tied to a home.
Mish
I myself a millennial could care less about a house, and honestly it irks my chain seeing my parents property taxes rise each year , when house prices themselves have been stale. My mother tried to renegotiate taxes based on the value of the home to no avail.
So now there are these 2 prices one what the county says the house and worth and another what it would actually sell for.
I’m basically on IBR (which is an income based student repayment) and the whole student loan will be forgiven after 20 years assuming my income stays as low as it is now. I did my taxes the other day and that fee on the Obama plan hit hard, but it’s still cheaper than the policies on the exchange. I have no choice but to take the penalty!
” My mother tried to renegotiate taxes based on the value of the home to no avail.”
Sounds like yo’ mama lives in Illinois, Judson. But there may be some other states nearly as corrupt also.
Home “ownership” is an illusion. You own nothing but the right to pay “taxes.” As local and state governments struggle to cover their pension promises that noose will tighten.
Correct, Michael. With real estate taxes being what they are, you really do not own your property, you are just renting it from the government. If you do not believe that is true, then try not paying the rent (taxes & assessments) and see what happens.
Many seniors now live in HUD housing. 95% of them are women as they outlive us men. Many are there simply because they could no longer afford to pay the property taxes.
Commenters here are correct the city will indeed foreclose on your paid off property if you cannot afford to pay their outrageous property taxes. Of course you no longer have any children in school but 86% of the tax goes to the schools.
I never considered owning a home as living the American Dream, even though mine is paid off. Owning a home is a liability. You will always pay taxes, maintenance and insurance. Oh and do not forget about the termite contract!!!!
In my neck of the Washington DC suburbs, there’s not much new home construction. What little there is are condos and town houses. The town houses are going for between $600k and $1 million. A mile or so away, you can purchase a 40 year old, 4 bedroom colonial on 1/3 acre for $500k. All things being equal, most prefer a new home in a hip new neighborhood, but the pricing makes no sense to me.