Existing home sales have plunged. Price will follow.
The National Association of Realtors (NAR) reports Existing Home Sales Wane 17.8% in April
Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 17.8% from March to a seasonally-adjusted annual rate of 4.33 million in April. Overall, sales decreased year-over-year, down 17.2% from a year ago (5.23 million in April 2019).
"The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales," said Lawrence Yun, NAR's chief economist. "But the listings that are on the market are still attracting buyers and boosting home prices."
Supposedly listings "are still attracting buyers" despite the fact that sales are down 17.8% on top of a 8.5% decline in March.
Note that April's existing-home sales are the lowest level of sales since July 2010 and the largest month-over-month drop since July 2010.
The median existing-home price for all housing types in April was $286,800, up 7.4% from April 2019 ($267,000), as prices increased in every region. April's national price increase marks 98 straight months of year-over-year gains.
"Record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen," Yun said. "Still, more listings and increased home construction will be needed to tame price growth."
Not the Bottom in Transactions
April will not mark the bottom in sales. Here's why.
Existing sales are recorded at closing whereas new sales are counted at signing.
April sales represent transactions that occurred in February and March.
May sales (transactions in March and April) are sure to be worse. Even June sales could be worse.
Expect Prices to Drop Too
Yun's statements regarding sales price constitutes more cheerleading.
Prices are up in April only because data is so skewed by the huge drop in sales.
Many people pulled listings due to Covid-19. Sellers will want prices they could have gotten in February, but alas, those prices are gone.
The hit to personal income ensures that a decent chunk of would-be buyers just vanished.
Grim Economic Data
May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
May 15: Retail Sales Plunge Way More Than Expected
May 15: Industrial Production Declines Most in 101 Years
To expect buyers to return en masse and price to hold up as well is irrational.
Looking to Buy? Wait!
Ignore the cheerleading from the NAR. Better prices await buyers who are patient.
This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.