Housing, which had been showing considerable second-quarter weakness bounced slightly. That was enough to beat the Econoday consensus.
Housing has been sliding which adds importance to May’s very solid 1.1 percent rebound in existing home sales to a higher-than-expected 5.620 million annualized rate. Today’s report is mostly solid throughout and includes gains for single-family homes, up 1.0 percent to a 4.980 million rate, and also condos, up 1.6 percent to a 640,000 rate.
The sales gains did not come at the expense of price concessions as the median price rose 3.2 percent to $252,800. Year-on-year, the median is up 5.8 percent and shows seller strength relative to a 2.7 percent gain for on-year sales.
Another positive is supply which, aided by strength in prices, is moving into the market, to 1.960 million vs 1.920 million in April and 1.800 million in March. Relative to sales, supply is at 4.2 months vs 4.1 and 3.8 in the prior two months.
The South is the leading and by far the largest region for sales, up 2.2 percent on the month for a 4.5 percent on-year gain to a 2.340 million rate. The West is next, up a monthly 3.4 percent to 1.220 million and a 3.4 percent gain from last year. The Northeast, which had been lagging, is showing life, up 6.8 percent on the month with the year-on-year rate up 2.6 percent at 780,000. Sales in the Midwest are May’s only negative, down 5.9 percent and down 0.8 percent on the year at 1.280 million.
The housing sector opened the year strongly but mostly fizzled during the Spring selling season. Yet this report limits that weakness and should confirm expectations for a bounce back in Friday’s new home sales report. Watch next week for pending home sales which will offer an advance indication on existing home sales in June.
Time to Sell Hits New Low
Mortgage News Daily reports Existing Sales Rise, Prices Peak, Time-to-Sell at New Low.
Existing home sales weren’t expected to strengthen in May, in fact analysts were looking for a slight decline. Sales however did manage to recover from a significant April loss while inventories increased slightly and the median sales price rose to a new high.
The National Association of Realtors® (NAR) said completed sales of existing single-family houses, townhouses, condos, and cooperative apartments rose 1.1 percent to a seasonally adjusted annual rate of 5.62 million. This was a 2.7 percent year-over-year gain.
April’s sales had tumbled by 2.3 percent compared to the previous month. Those sales were revised lower still, from the original rate of 5.570 million to 5.560 million.
Analysts polled by Econoday had expected sales to be in the annual range of 5.450 million to 5.650 million. The consensus was in the exact middle at 5.550 million.
Lawrence Yun, NAR chief economist, commented on the positive May numbers, saying that buyers were able to overcome increasingly challenging market conditions in many areas. “The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level,” he said.
“Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher.”
The percentage of first-time buyers is not improving. They accounted for a 33 percent share of sales in May, 1 percentage point lower than in April. NAR said the average share for all of 2016 was 35 percent. Individual investors purchased 16 percent of homes sold during the month and 64 percent of them paid cash. Twenty-two percent of transactions were all cash in May.
Happy and Relieved
The Econoday parrot, quick to jump on any positive may be reading too much into one month. The NAR parrot was even more amusing.
On January 16, the NAR chief economist Lawrence Yun mentioned a “Housing Emergency” as starts unexpectedly fell 5.5% leaving Yun “befuddled”.
Existing home sales were down 2.3% in April and new home sales were down 11.4%. For the quarter, sales are down 1.3% with two months reporting.
For the quarter, existing home sales are down 1.3% with two months reporting. Let’s not get too excited.
The percentage of first-time buyers is not improving because they still cannot afford a house. And anyone “happy and relieved” about overpaying in this clearly overpriced market will soon have other thoughts.
What happens when investment demand and flippers dry up?
Mike “Mish” Shedlock
Oh no, not another housing bubble!
I thought Mish had said that no bubble ever gets reblown.
Mish, would you like to comment? Is this a new thing we have seen?
Typically bubbles are not immediately re-blown.
The dot-com bubble morphed into a housing bubble for example
We are in an everything bubble now – so yes – housing did get immediately re-blown
It took 10 years for the median home price record to be re-set in Orange County, CA, not even adjusting for inflation. Inflation-adjusted we are nowhere near the 2007 peak. And everyone agrees that there is no more underwriting insanity in home mortgages like back in 2000-2007.
Reasonable people can disagree on what constitutes a bubble, and I admit my own bias, but this time does not feel like last time. Of course, that has no bearing on how the future plays out, but at least there is no overt fraud in the market.
I would call it a bubble for the following reasons:
1. The central bankers are holding the whole system aloft and they seem to be in a relay race. When one stops the other picks up the baton. The Fed, ECB, PBoC, BoJ and others… So how will it look without their support.
2. The CBs seem intent on NOT LETTING even a minor correction in asset pricing
3. Interest rates have been nailed down to the floor in all countries
4. CBs seem to be buying up everything to prop up asset prices (e.g. SNB, ECB). What happens to Apple if SNB dumps its holdings?
5. Whenever it looks like the market is going to sink, we have all the CBs coming out of the woodwork and talking of QE, buying up everything on the planet, NIRP, ZIRP for ever etc. and bringing it right back up. Can they do it forever? Even Atlas might find it daunting.
6. The CBs still seem to be shivering to normalize anything. If they are not sure how can we be?
7. Mark to myth is still at work
8. The idea that CB Put is now a given and hence market has only one way to go.
9. The debt has nearly doubled since Jan 2009 and its implications on interest rates
While anyone who breathes is not given a loan for housing by banks now, it appears to be a case of liquidity provided in spades by the CBs that is responsible for the sky-high asset pricing in almost everything. Can they ever normalize without crashing the market? HIGHLY UNLIKELY. So may be there will be a new normal.
While in 2007 it was the banksters who created the crisis, IMO it is the central banksters who are doing the job this time. How it can end well is beyond me. Can they keep the whole thing afloat forever? I doubt it but then markets can be irrational longer than you can be solvent, so I do not know how long this can go on. But when it breaks it could be extremely devastating. May be for this reason they are not going to let it happen. But then…
Central banksters at work…
https://northmantrader.com/2017/06/20/playing-with-fire/
Was expecting the dam to burst in 2011 … 2012 … 2013 … 2014 …. 2015 … kind of stopped expecting it in 2016 … lost all patience and re-entered the housing market in 2017. Where is this mysterious bursting dam? Don’t care anymore, it would have happened by now.
Diageo just blew $1 billion buying yet another tequila brand.
You know the world is desperate for new ideas when…
In the last month, Obamacare collapsed in Arizona and earlier today in Indiana.
Still **No free lunch**
WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 0.5 percentage points in May to 86.2. The slight decrease can be attributed to decreases in three of the six HPSI components being larger on net than the three increases. The net share of Americans who reported that now is a good time to buy a home reached a record low after falling 8 percentage points, while the net share who reported that now is a good time to sell a home reached a record high, increasing 6 percentage points. This is only the second time in the survey’s history that the net share of those saying it’s a good time to sell surpassed the net share of those saying it’s a good time to buy.
– See more at: http://www.fanniemae.com/portal/media/corporate-news/2017/may-home-purchase-sentiment-index-6566.html#sthash.nklThRKQ.dpuf
Hi MISH
If the buyers can’t afford to buy a house then they will rent an accommodation apartment or house and they will become clients for landlords so that people like me can cash in rents and buy stxx that’s how you get richer and what you call in the US the American dream.
“Those able to close on a home last month are probably feeling both happy and relieved.”
I closed on April 27, 2017. I am happy and relieved.
“Listings in the affordable price range are scarce.”
Yes they are. Should say “attractive listings” but yes.
“Homes are coming off the market at an extremely fast pace.”
Yes they are, within 24 hours in many cases
“The prevalence of multiple offers in some markets are pushing prices higher.”
In Orange County, CA this is reality. Bidding wars and getting +5% of asking in many cases.
I don’t have a crystal ball, but there are more buyers than sellers in Orange County, there are no new single-family residences being built (plenty of townhomes being built) and homeowners are not selling because they don’t want to have to find a new home in this market. All of this points to price gains for the foreseeable future.
FYI, the median existing single-family home price in my area has risen almost 10% since I closed on my home 7 short weeks ago.
http://www.ocregister.com/2017/06/21/home-price-records-reached-in-orange-l-a-counties/#disqus_thread
Wow, 10% in 7 weeks. If that keeps up your house will double in value every year.
Yeah, not counting on nor even desiring that pace of appreciation, but the median existing SFR in OC has gone from $645K to $695K in only two months. 4% annual would be more than satisfying.
stocks have been priced beyond perfection for a while, now it’s time for housing to catch up, this is what happens when big banks and big gov get in bed together
will there be any safe refuge for the 99%ers when all these concurrent valuation bubbles burst? banked cash will be taken by bailins, forgeddabout gold in vaults
Yes, but first-time homebuyers were averaging 45 years old and taking out 30 year debt.
Totally making that up, but wouldn’t it be an interesting statistic to see how old first-time homebuyers are?
The average first-time homebuyer is about 33, at the front end of the Millennial generation. Their median income is $54,340, which is about the same as what first-time homebuyers made in the 1970s, when adjusted for inflation.
http://nationalmortgageprofessional.com/news/55433/zillow-average-first-time-homebuyer-33-years-age
For clarity, the first bubble never ended. we are still in it.