November 21 2024

As you may have gleaned from our coverage of new home sales, construction, builder confidence, and mortgage apps recently, there are only so many ways to describe the same phenomenon.  Today's report on October's Existing Home Sales from the National Association of Realtors (NAR) is just another player on that same stage.  Like the others, it's languishing at the lowest levels in a long time and cutting a broadly sideways path. Like the others, we can tie the big drop in 2022 to the big rate spike in 2022.  After the problematic time frame highlighted in the chart below, little has changed for sale or rates in the bigger picture.  This particular data series has one other interesting nuance and it has to do with inventory levels.  Existing home inventory has a very reliable pattern of peaking in the summer and bottoming out around the new year.  2023's inventory peaked much later in the year and now this year, the peak has yet to show up! What should we make of this?  Are more people listing their homes or are fewer people buying the homes that are listed?  Turning to Redfin's housing data center (which is not the same data set as the Existing Homes data, but may provide some insight), the suggestion is that the sales slowdown has more to do with the inventory building.  The chart below shows that 2024's new listing levels closely match 2023's up to this point in the year. Other highlights from this month's NAR Existing Sales report:

November 20 2024

First thing's first, mortgage applications increased last week, both for purchases and refinances! It was the first improvement for refi demand since mid September, when rates were well into their lowest levels in more than 2 years.  Top tier conventional 30yr fixed rates were being quoted at around 6% at the time, but moved rapidly up to 7%+ in the first 3 weeks of October. The resulting drop in refi demand was as logical as it was unfortunate, and it didn't really let up until 2 weeks ago.  Since then, last week saw only a microscopic decrease which, in turn, paved the way for this week's microscopic increase.  In the bigger picture, the refinance index remains in the lowest territory in decades. The Purchase Index is actually in a similar boat.  In fact, we'd need to go even deeper into the past to see demand at current levels.  The key difference is that there wasn't any interesting rate-driven bump in the past few months.  Purchases apps simply ground to a halt by late 2023 and haven't done much since then. Other highlights from MBA's weekly application update: Refi share of total activity: 41%, up from 39.9 previously FHA share: 16.6% vs 16.0 previously VA share: 13.6% vs 13.3 previously Average contract rate (30yr fixed) 6.90 vs 6.86 Orig/Points up to 0.7 from 0.6 Jumbo rates were 0.13% higher than conventional and FHA rates .22% lower

November 19 2024

The most common interval for scheduled economic data is "monthly."  That means that things like inflation, sentiment, job counts, unemployment, retail sales, and many other economic metrics are updated and released every month, even when nothing very interesting is happening. On that note, there are several regularly scheduled housing related reports.  This month's installment of New Residential Construction is today's example and, as you may have guessed, nothing very interesting is happening.   At a glance details: Housing Starts (1st phase of actual construction) 1.311 million annual pace vs  1.33m forecast, 1.353m previously Building Permits 1.416m vs 1.430m forecast, 1.425m previously Neither measurement stands out on a longer term chart.  Both have dialed back from the long-term highs seen between late 2020 and early 2022, but both remain in strong territory relative to 2019.  This is the first way to view the slowdown in construction. The other way to view the slowdown is to focus solely on the slowdown in greater detail and attempt to connect it to another variable.  That ends up being fairly easy if we merely consider the massive rate spike that coincided with the rapid contraction in building permits. In not so many words, construction metrics have been bouncing around their current levels ever since mortgage rates spiked to the 6-8% range. This isn't to say that interest rates are the exclusive reason for the slowdown, but the rate spike coincides with other headwinds.  Those include things like affordability, labor costs, machinery/material costs, and financing costs for builders.