US: Home sales are soft, not weak - Wells Fargo

Data released today showed that Existing Home Sales dropped in March 4.9% to a 5.21 million (annual). Analysts at Wells Fargo, point out that sales fell across the country but declined particularly sharply in higher-priced markets.

Key Quotes: 

“After surging by a revised 11.2% in February, existing home sales fell 4.9% in March. Some pullback was estimated following February’s big jump but the drop was somewhat larger than expected. February’s sales were also revised slightly lower.”

“Even with the latest drop, existing home sales have averaged a 5.21-million-unit pace through the first three months of 2019. The NAR noted homes remained on the market for an average of 36 days in March, down from 44 days in February but up from 30 days last March.”

“The chief concern is that the pullback in mortgage rates, which brought the commitment rate for conventional 30-year mortgages down to 4.27% from around 5% in October and November, has not done more to boost sales.”

“The cooling in demand for higher priced homes and improvement in sales at the lower end has led to a moderation in median and average home prices. The median price of an existing single-family home sold in March was $261,100, which is 3.8% higher than it was a year ago.”

“March’s drop in existing home sales is likely to increase concerns about the key spring selling season. As noted previously, sales are soft, they are not weak. We do not see demand taking off, however, as homes affordability and the proportion of consumers stating that now is a good time to buy a home has been declining for the past few years. The good news is that home price appreciation is moderating and wages and salaries are rising more rapidly, which should boost affordability somewhat this year.”