The National Association of Realtors reported existing home sales dropped 4.9 percent in March. This puts existing U.S. home sales down 5.4 percent compared to last year. Apparently the stimulus provided by crashing mortgage interest rates has already run its course. Home builders certainly aren’t taking any chances, as confirmed by the weak starts and permits data we saw last week. Builders are apparently happy to sell off some of their remaining new home inventory rather than ramp up production in a meaningful way.
NAR reported that the median price of an existing home in March was $259,400, up 3.8% from last year. This was the 85th straight month of existing home price increases in the United States. Total inventory of existing homes rose to 1.68 million homes or 3.9 months of supply. First-time buyers were responsible for 33 percent of sales in March, on par with last year’s average. All-cash transaction accounted for 21 percent of sales in March, up from 20 percent a year ago.
NAR’s chief economist, Lawrence Yun, called for more inventory…
“Further increases in inventory are highly desirable to keep home prices in check.”
Yun is also apparently unaware that mortgage interest rates have been creeping higher for the last four weeks…
“The impact of lower mortgage rates has not yet been fully realized.” This doesn’t bode well for April numbers. LOL!
Inventory is only part of the problem facing the housing market. The mismatch of inventory available for sale vs what buyers can actually afford is the bigger problem. This is something I mentioned in the latest housing market report for Denton County. Existing homeowners are still reluctant to drop prices to meet the market, especially since many of the most likely sellers are sitting on larger, higher priced homes.
Regardless of the circumstances NAR president, John Smaby, reiterated the usual mantra that it’s a great day to buy a home…
“We’re also seeing very favorable mortgage rates, so now would be a great time for those buyers who may have been waiting to make a purchase.”
Mortgage rates have been back on the rise during the last month. This is certainly going to cause some issues with housing affordability. Many existing homeowners are also getting their 2019 appraisal assessments in the mail, with record high tax bills to boot. With Texas’ two-tiered property tax system putting the screws to residential homeowners, existing home sales are likely to resume their recent stagnation.
It would appear the jawboning from the Fed, and the market levitation that spurred a rebound during the first few months of the year has already run its course. The housing market will now have to deal with the mess the Federal Reserve has created, and that could take years to sort itself out.