November 26 2024

Even on a good day, the Census Bureau's New Residential Sales report has a notoriously wide margin of error.  But today's 12.8% margin of error isn't even the best counterpoint to today's ostensibly alarming 17.3% month over month decline.  After all, that would still be at least a 4.5% decline. Another counterpoint--also not remotely the best one--would be that home sales continue to operate in the same sideways range that's been intact for nearly 2 years now: So what is the best "yeah but?"  It's very simple, and it should become clear when you take a look at the geographical distribution of this month's losses.   For those that gloss over at the sight of big tables of numbers, the critical observation here is whopping 27.7% decline in home sales in the South, as well as the fact that the outright number of sales is far below any other month going back to October 2023. In fact, every other region has at least 3 other months in the past 12 that have come in lower. Connecting the dots, many of us will remember that October brought the uniquely disruptive category 5 Hurricane Milton.  Long story short, it would have been a surprise NOT to see a massive drop in home sales activity in the south in October.  Really, the only curiosity here is that economic forecasters didn't have weather effects priced into their models. 

November 26 2024

There are two key, big picture home price indices in the U.S.  They come out every month, but with a 2 month lag.  That means we're getting September's prices today.   The two indices are: S&P Case Shiller, which focuses on a smaller data set that tends to detect trends sooner, but also in a more volatile way FHFA, a U.S. government agency that ultimately captures about as many transactions as could possibly be captured, thus producing the broadest and most authoritative update on home prices.  For this reason, it serves as the foundation for updating the annual conforming loan limit. What happened with September's data? The more volatile Case Shiller data declined by 0.3% in September while FHFA's broader data set showed 0.7% growth.  These discrepancies aren't uncommon.  Moreover, both are reflecting a mid-4% rate of appreciation in annual terms. What are the implications for conforming loan limits, and what even is a conforming loan limit (CLL)? The CLL is the highest loan amount that can be guaranteed by housing agencies Fannie Mae and Freddie Mac. Their guarantee allows for several advantages ranging from standardized automated underwriting capabilities to generally lower interest rates.  There is a base loan limit, but some of the most expensive counties can be 150% of that limit. The previous loan limit was $766,550.  

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: