A Few Comments on February Existing Home Sales

by Bill McBride on three/22/2017 02:39:00 PM

Earlier: NAR: "Existing-Home Sales Stumble in February"
Numerous key components:
1) As common, housing economist Tom Lawler&#zero39;s forecast was nearer to the NAR report than the consensus. See: Existing Home Sales: Take the Under
2) The warmer local weather most likely had no affect on February product sales (current residence product sales are reported at closing). Hotter local weather in February may want boosted product sales for March and early April.
three) The contracts for February current residence product sales had been entered after the newest improve in mortgage costs (costs started rising after the election).
With the newest improve in costs, I&#zero39;d anticipate some decline in product sales amount as occurred following the "taper tantrum" in 2013. That’s the main month with softer product sales (and it’s only one month), so maybe product sales will keep up.
4) Inventory stays to be very low and falling year-over-year (down 6.4% year-over-year in January). Further inventory would most likely indicate smaller price will enhance and barely higher product sales, and fewer inventory means lower product sales and significantly greater price will enhance.
To repeat: Two of the necessary factor causes inventory is low: 1) Numerous single family residence and condos had been reworked to rental fashions. In 2015, housing economist Tom Lawler estimated there have been 17.5 million renter occupied single family homes inside the U.S., up from 10.7 million in 2000. A lot of these properties had been purchased by merchants, and rents have elevated significantly, and the merchants shouldn’t selling (even though prices have elevated too). Most of these rental conversions had been on the lower end, and that is limiting the availability for first time patrons. 2) Little one boomers are ageing in place (people are inclined to downsize after they’re 75 or 80, in a single different 10 to 20 years for the boomers). Instead we’re seeing a surge in residence enchancment spending, and that’s moreover limiting present.
In truth low inventory retains potential move-up patrons from selling too. If anyone seems spherical for an extra residence, and inventory is lean, they may resolve to solely maintain and enhance.
I expect inventory shall be rising year-over-year by the tip of 2017.
The following graph reveals current residence product sales Not Seasonally Adjusted (NSA).
Existing Home Sales NSAClick on on on graph for greater image.
Product sales NSA in February (crimson column) had been the perfect for February since 2007 (NSA).
Remember that product sales NSA are inside the sluggish seasonal interval, and might improve sharply (NSA) in March.