Surprise, surprise. Existing home sales declined 0.9% in August following a revised lower 3.4% drop in July. This will likely take a few ticks off steadily declining 3rd quarter GDP estimates.
The National Association of Realtors (NAR) was surprised and so were Econoday Economists, as is typically the case.
The Econoday consensus estimate for July existing home sales was 5.44 million at a seasonally adjusted annualized rate (SAAR). The consensus range was 5.350 million to 5.550 million. Not a single economist hit the range. Congratulations.
Percentage-wise economists expected a 0.9% rise. Instead we had a 0.9% decline.
Prices are soft and resales aren’t coming into the market. Existing home sales fell a monthly 0.9 percent in August to a 5.33 million annualized rate, roughly the same rate where it was a year ago at 5.29 million for a thin 0.8 percent gain. And the single-family component isn’t showing much life, down 2.3 percent in the month and up only 0.6 percent on the year. Saving the August report are condos which jumped 10.5 percent in the month to a 630,000 rate for a year-on-year gain of 1.6 percent.
Supply is very thin and is holding down sales. Supply on a monthly basis is at 4.6 months with 3.3 percent fewer existing homes for sale, at 2.04 million from July’s 2.11 million. Prices aren’t offering great incentives for possible sellers, with the median down 1.3 percent in the month to $240,200 for a year-on-year rate of 5.1 percent which, however, is still respectable in a low wage growth economy.
There hasn’t been a lot of action this year in the resale market though the new home market is definitely showing life and, by itself, is likely to make housing a modest positive for the 2016 economy. In a final note, regional sales data are evenly balanced in today’s report, ranging from no year-on-year change for the Northeast to only a 0.9 percent gain for the South.
Existing home sales have not been showing the strength of new home sales while the pending home sales report, which tracks contract signings for existing homes, is pointing to continued softness. But price data in this report have been weakening which may be a plus for sales while supply of homes on the market, though still thin, has been improving which may be another plus.
NAR, Economists Surprised
The Wall Street Journal reports Existing-Home Sales Fall for Second Straight Month.
The NAR’s chief economist, Lawrence Yun, attributed the drop to a declining supply of homes on the market. Construction of new homes is lagging job growth. Prices have risen sharply as a result, and many potential home buyers have few choices on the market, he said.
The latest decline in home buying “is somewhat surprising given the broader economy continues to create jobs,” Mr. Yun said. “We go back to the same bottom line: lack of inventory choices, prices rising way too fast, hurting affordability.”
I am going to mentally take a couple of ticks off of my guess of the next FRBNY Nowcast report due tomorrow. Most likely it will be a surprise to the economists.
Mike “Mish” Shedlock