Where Goes the Housing Market?

The Mortgage Corner

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Calculated Risk

WASHINGTON (December 19, 2018) – Existing-home sales increased in November, said the National Association of Realtors®, marking two consecutive months of increases. Three of four major U.S. regions saw gains in sales activity last month.

Total existing-home sales, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.9 percent from October to a seasonally adjusted rate of 5.32 million in November. Sales are now down 7.0 percent from a year ago (5.72 million in November 2017).

Why the return to increased sales after the market downturn? The 30-year fixed conforming mortgage rate has dropped back to 4 percent with a 1 point origination fee, 4.25 percent with 0 points in origination fees for the most qualified borrowers. Rates are lower because there is almost no inflation and investors are fleeing back to bonds as a safe haven in an unsafe world at present.

Lawrence Yun, NAR’s chief economist, said two consecutive months of increases is a welcomed sign for the market. “The market conditions in November were mixed, with good signs of stabilizing home sales compared to recent months, though down significantly from one year ago. Rising inventory is clearly taming home price appreciation.”

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Calculated Risk

The housing market is cooling, in other words. Inventories of unsold homes have been rising year-over-year; housing prices and inventories in the west, particularly, have soared. Las Vegas inventory is the rising red line on the Calculated Risk graph, the black line is the NAR’s national inventory level.

“A marked shift is occurring in the West region, with much lower sales and very soft price growth,” said Yun. “It is also the West region where consumers have expressed the weakest sentiment about home buying, largely due to lack of affordable housing inventory.”

The median existing-home price for all housing types in November was $257,700, up 4.2 percent from November 2017 ($247,200). November’s price increase marks the 81st straight month of year-over-year gains.

Total housing inventory at the end of November decreased to 1.74 million, down from 1.85 million existing homes available for sale in October. This represents an increase from 1.67 million a year ago, however. Unsold inventory is at a 3.9-month supply at the current sales pace, down from 4.3 last month and up from 3.5 months a year ago.

Properties typically stayed on the market for 42 days in November, up from 36 days in October and 40 days a year ago. Forty-three percent of homes sold in November were on the market for less than a month, which is still a good number.

“It is not surprising to see homes remain on the market a little longer,” said NAR President John Smaby. “Buyers can often negotiate a more favorable price in those circumstances, especially when paired with a motivated seller and the aid of a Realtor familiar with their local market.”

The result is more apartment units are being built to accommodate the rising number of new households—mainly in the millennial generation, say home builders. So it does look like the housing market has topped and is in a slow decline. But with interest rates continuing to fall, and home purchases more affordable again, the decline in single-family construction may reverse.

Harlan Green © 2018

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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