The National Association of Realtors reported existing home sales for April which came in short of expectations. Existing sales in April posted at a seasonally adjusted annual rate of 5.19 million units. This was 0.4 percent lower than March and 4.4 percent lower than April of 2018. According to NAR the median price of an existing home rose 3.6% in April to $267,300. The average price of an existing home in the U.S. rose 2.5% to $305,200. The inventory of existing homes for sale in April stood at 4.2 months, up 5% from a year ago.
NAR’s chief economist expects moderate growth very soon…
“First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions. Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales.” Lawrence Yun
Now would be a good time for a collective yawn. April marked the 14th consecutive month of declining year-over-year activity in existing home sales. April also marked the 86th straight month of year-over-year price gains. Anyone see a correlation here?
The problem plaguing the U.S. housing market continues to be a lack of affordability. This is why sales are still declining even as home inventory is growing. I would add that this dynamic is occurring in the midst of the longest economic expansion in U.S. history with near record low unemployment. Just imagine what existing home sales would look like if we were experiencing a recession.
Amazingly there are some real estate investment “advisors” and investment “strategists” rambling on Twitter that we have an “epic underbuilding of homes” in the U.S. That is absolutely laughable, but not too difficult to understand. Sell-side Wall Street types are notorious for talking their books.
It is worth remembering that the U.S. is still sitting on 6 months of new home inventory. There are over 6000 new homes for sale just in the DFW area alone. If builders had demand to absorb the construction, they would certainly be building more homes…but they don’t. Demand is currently concentrated the more affordable price segments, and builders are doing a decent job of adjusting their product mixes to meet demand.
In a few days we will get the Census numbers for new home sales in April. The sales data in DFW shows that new home sales have been benefiting from lower rates, but the momentum from the big drop in mortgage interests rates we saw in the first quarter appears to have subsided. Existing home sellers are having a more difficult time adjusting to the shift to more affordable homes. It’s tough for many sellers to swallow the fact that the market has shifted, and this reality is reflected in the continuing decline in existing home sales volumes.