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.
Highlights
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.
Recent History
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.”
Surprise, Surprise
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
“The latest decline in home buying “is somewhat surprising given the broader economy continues to create jobs,” Mr. Yun said.”
Not surprising at all Mr. Yun when you come to understand that those new jobs don’t pay enough to provide for home ownership.
More “surprise”
Chicago Federal Reserve NAI for August
Consensus … +.15
Range of “experts” … +.10 to +.16
Actual … -.55
http://mam.econoday.com/byshoweventfull.asp?fid=473938&cust=mam&year=2016&lid=0&prev=/byweek.asp#top
Well, since we are on the topic of Surprises.
Hoo knew Bubba was a “racist”?
1995 SOTU:
…
“All Americans, not only in the states most heavily affected but in every place in this country, are rightly disturbed by the large numbers of illegal aliens entering our country. The jobs they hold might otherwise be held by citizens or legal immigrants. The public service they use impose burdens on our taxpayers. That’s why our administration has moved aggressively to secure our borders more by hiring a record number of new border guards, by deporting twice as many criminal aliens as ever before, by cracking down on illegal hiring, by barring welfare benefits to illegal aliens. In the budget I will present to you, we will try to do more to speed the deportation of illegal aliens who are arrested for crimes, to better identify illegal aliens in the workplace as recommended by the commission headed by former Congresswoman Barbara Jordan. We are a nation of immigrants. But we are also a nation of laws. It is wrong and ultimately self-defeating for a nation of immigrants to permit the kind of abuse of our immigration laws we have seen in recent years, and we must do more to stop it.”
http://millercenter.org/president/clinton/speeches/speech-3440
The shortage of inventory argues against weakness as the cause for lower sales this month. Instead that hints that homeowners are refusing to put homes on the market because they expect prices to start rising sooner than later.
“Not a single economist hit the range.” I would like to become an economist, it sounds easy to keep up with the competition.
“hurting affordability.”
Not surprising Yunster the Spinster failed to mention the big dip in interest rates.
Avg rate on 30yr mortgage
August 2015 … 3.91%
August 2016 … 3.44%
http://www.freddiemac.com/pmms/pmms30.htm
If there were a supply issue, prices would be sky high. Yes, prices are up; however, prices are not increasing as quickly as in 2005-6.