Existing Home Sales Plunge 17.8% Much Worse is on the Way

Mish

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.”

Immense Cheerleading

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.

Prices Rise 

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

  1. May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
  2. May 15: Retail Sales Plunge Way More Than Expected
  3. 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.

Mish

Comments (34)
No. 1-16
kurtellis
kurtellis

unless you have some kind of recession proof job i would not be making any new long term commitments in terms of housing for the forseeable future. cash is king, but flexibility in your life situation will be key to survival

IA Hawkeye in SoCal
IA Hawkeye in SoCal

Sticker prices are not down that much....only 1%. "Real values" have decreased 18% in the last 20 years, as lower interest rates create a false sense of value. The "monthly payment" mentality. However, I stick by my opinion that 30 year mortgages in the 2% to 2.5% range are just around the corner, and that will continue to prop up the asking prices.

Again, people have to live somewhere. Housing panic is overblown IMHO.

lesbaer45
lesbaer45

Houses in this area are still flying off the shelf. "Good" ones don't sit very long. It's mostly those fleeing the NE and IL judging from the license plates and accents. As long as their cash/credit holds out they are buying anything and everything. Long term some of these building are trash (hastily built, poorly built, built to a cost) but for now, buy,buy,buy!

This region sort of dodged the 08-10 housing crash, just a slight wound. This time when it tanks, I don't think it's going to be a sucking chest wound. "Tech" won't save them, it's mostly vaporware and 'apps' these days.

MiTurn
MiTurn

I'm convinced that we all got Lawrence Yun wrong. He's really a wanna-be stand-up comedian. Granted, he's not very funny, but he really, really tries. For years now.

Tony Bennett
Tony Bennett

"Yun's statements regarding sales price constitutes more cheerleading."

...

Yes. Re: higher price ... low mortgage rates WAS a factor. Checked typical 30 yr mortgage rate for April 2019 - in the 4.25% to 4.50% range. April 2020 - in the 3.25% to 3.50% range. Ran the mortgage calculator and ~ $150 / month cheaper for $300K mortgage. Not surprising higher prices considering more Bang for buck + big drop in inventory.

Sellers pulling their homes off the market will likely rue the decision.

Tony Bennett
Tony Bennett

Secretary Mnuchin slowly moving the economic goal posts

April 26th:

“I think as we begin to reopen the economy in May and June, you’re going to see the economy really bounce back in July, August, September,”

May 21st:

WASHINGTON (Reuters) - U.S. Treasury Secretary Steven Mnuchin said on Thursday he believes the U.S. economy will “bottom out” in the second quarter and start to improve with the third quarter, with a “gigantic increase” in fourth quarter activity.

Sechel
Sechel

Yun has never been a real economist. He's he p.r. guy for the real estate industry. He's as good as an economist as Peter Navaro.

Sechel
Sechel

As far as existing home sales. expect predicable pattern. reduced sales because of lockdown, then a transition period where buyers and sellers rediscover a clearing price. those sellers with financial flexibility will pull their listings and convert it to an investment property until prices improve. this is why volume is typically stronger in a rising market

Tony Bennett
Tony Bennett

Going forward.

Not surprising Yun failed to mention a single word on forbearance.

From Black Knight:

Black Knight says that about 46 percent of borrowers in forbearance at the end of April, 4.25 million in number, made that month's payment while 54 percent did not.

...

But Black Knight says that May seems to be shaping up a bit differently. As of this report, only 21 percent of those in forbearance had made their May payments. This means that up to 1.4 million who made April payments are at risk of becoming past due in May. This could lead to another sharp increase in the national delinquency rate next month.

RonJ
RonJ

“The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales,”

I notice by the chart, that home sales are still temporarily down from the level they were in 2005. 15 years of temporarily.

awc13
awc13

Yun in a Baghdad bob

Mr. Purple
Mr. Purple

Homeownership isn't just for families anymore. Lots of big boys have skin in this game. You know, the TBTF kind.

Of course this looks deflationary. So does everything else but prices remain static.

That being said, Lawrence Yun obviously subscribes to the Benny Hinn power of positive thinking just like our moron-in-chief. It explains why every word out of their mouths sounds like a lie.

Six000mileyear
Six000mileyear

Half of the 10 year housing recovery just vanished in a month. Any bets how many months it will be until the ENTIRE housing recovery has been erased?

mishisausefulidiot
mishisausefulidiot

Gosh, if we can just put a few more million people out of work, maybe we can tank the economy enough to get a real bargain, and provide additional contrived excuses to bail out mismanaged state and local govt's.

Jackula
Jackula

Elon Musk is selling all 7 or more of his homes...getting liquid to avoid going bk. Or planning to migrate to Mars to build the city of Musk? He may throw childish tantrums occasionally but he's a long ways from an idiot. Suspect a lot of folk with money have many homes, a sustained downturn may put plenty on the market...


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