The National Association of Realtors reported that existing home sales for January posted at a seasonally adjusted annual rate (SAAR) of 4.94 million. This was 1.2 percent lower than the December reading, and 8.5 percent lower than the same time a year ago. The median price of a resale home sold in January was $247,500 while the average price of a U.S. resale property sold in January was $286,800. With the modest rise in prices, January saw the 83rd consecutive month of year-over-year price gains. The inventory of existing homes in the U.S. rose 4.6 percent.

NAR’s chief economist, Lawrence Yun, offered his take:

“Existing home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low. Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months.”

Yun also danced around the problems with the current housing market and the lack of affordable inventory…

“In particular, the lower end of the market is experiencing a greater shortage, and more home construction is needed. Taking steps to lower construction costs would be a tremendous help. Local zoning ordinances should also be reformed, while the housing permitting process must be expedited; these simple acts would immediately increase homeownership opportunities and boost local economies.”

First-time buyers comprised 29 percent of sales in January while all cash sales accounted for 23 percent. It goes without saying that most of those all cash sales were investors, and NAR noted that individual investors snatched up 16 percent of the sales in January. Renter nation is alive and well, fueled by the Fed’s market-levitating bubble-blowing machine.

It’s interesting that Yun continues to beat around the bush in terms of the lack of housing affordability and the mismatch between what’s on the market vs what most buyers can actually afford. Zoning restrictions are only a small issue in terms of why builders aren’t building more affordable homes. When every piece of dirt has been artificially inflated by Fed policy, there’s only so much builders can do to bring affordable, entry-level homes to the market. Mortgage rates have already fallen back to where they were a year ago.

Yun apparently thinks we have seen a cyclical low in existing home sales. I happen to disagree. Inventory is still low in many areas, but there are plenty of stresses in the system which are eroding home buyer confidence. This is certainly the case in Denton County Texas. We are still seeing the effects of the market plunge in December. The Fed has managed to jawbone markets higher in 2019 with an abrupt shift in policy. If the market heads lower again, there is little the Fed can do short of negative interest rates and more QE. It is worth remembering that the Fed can delay the completion of the market cycle, but they can’t prevent it. This is something Mr. Yun should have learned by now.