Existing Home Sales Crush Recovery Narrative, Plunge Most Since Nov 2015

Following yesterday's 7 standard deviation beat in New Home Sales, Existing Home Sales for July missed expectations by 2 standard deviations dropping 1.64% YoY - the first annual decline since Nov 2015. The blame for this collapse - according to NAR's Larry Yun - is "frustratingly low inventory levels."

 

 

New Home Sales...

Existing Home Sales...

Which one of these "sales" series looks more like Mortgage apps?

 

Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months.

Slowed by frustratingly low inventory levels in many parts of the country, existing-home sales lost momentum in July and decreased year-over-year for the first time since November 2015, according to the NAR. Only the West region saw a monthly increase in closings in July. 

 

Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” he said. “Realtors® are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”

 

 “Furthermore, with new condo construction barely budging and currently making up only a small sliver of multi-family construction, sales suffered last month as condo buyers faced even stiffer supply constraints than those looking to purchase a single-family home.”

We warned that a slowdown loomed last week...noting three prominent "red flags" that the US housing market was starting to roll over.

Among these were a report by real-estate advisory RealtyTrac, which cited by Bloomberg, said that "almost nine years after the housing-market bust helped trigger the most recent recession, RealtyTrac senior vice president Daren Blomquist sees the industry waving a red flag." He was referring to house flipping by third party investors at auction which was back with a vengeance, and what's worse, the share of foreclosures snapped up by inexperienced mom-and-pop buyers at auction had hit a record 31% in June. As he said, "this a redux of the same fervent speculation that pushed the housing bubble."

 

The second warning came as a result of the latest sharp decline in spending on furniture and home goods stores, which according to Bank of America credit and debit card spending data, showed that the yoy drop had reached the lowest since the recession period. As BofA said then, "this shows that consumers have delayed spending on housing-related items, which could be a sign of weakness for the housing market."

 

The third red flag was revealed in the then-latest Credit Suisse survey of real estate agents: "Our Buyer Traffic Index took a sizeable step back in June, slipping to 41 from 52 in May, indicating traffic levels decidedly below agents’ expectations.... Prospective buyers also continue to be deterred by a persistent shortage of affordable inventory across markets, with agents frequently highlighting buyer pushback to rising home prices. On the other hand, agents repeatedly mentioned that low mortgage rates were crucial to supporting demand."