Housing collapse continues AIER

Existing home sales fell another 5.9 percent in October to 4.43 million at a seasonally adjusted annual rate. This is the ninth consecutive monthly decline, leaving the selling pace at the lowest level since May 2020, the lowest level in a lockdown recession. Excluding the lockdown recession, sales were at their lowest levels since December 2011. Sales were down 28.4% from a year ago and 31.7% from the January peak.

Sales in the market for existing single-family homes, which account for about 90 percent of all existing home sales, fell 6.4 percent in October, to 3.95 million at a seasonally adjusted annual rate (see chart one). Sales were down 28.2 percent from a year ago and 31.3 percent from the January peak. Single-family sales also fell for the ninth month in a row and were at the slowest pace since the May 2020 lockdown recession.

The single-family segment saw sales decline in all four regions. Sales fell 4.7 percent in the Midwest, 5.4 percent in the South, the largest region by volume, 7.8 percent in the Northeast, the smallest region by volume, and 10.3 percent in the West. Sales were down two-fold in all four regions from a year ago (-38.1% in the West, -26.4% in the South, -25.5% in the Midwest, -23.0% in the Northeast).

Sales of condominiums and co-ops fell 2.0 percent for the month, leaving sales at an annualized rate of 480k for the month versus 490k in September (see chart one). Compared to last year, sales of residential and co-op apartments declined by 30.4 percent, and were at their slowest pace since June 2020.

Condo and co-op sales declined in one of the four regions in October, declining 14.3 percent in the Midwest but unchanged in the Northeast, West and South. From a year ago, sales were also down in all four regions (-33.3% in the South, -33.3% in the West, -23.1% in the Northeast, and -25.0% in the Midwest).

Total inventory of existing homes for sale fell in October, falling 0.8 percent to 1.20 million, leaving months supply (inventory count 12 divided by annual sale rate) at 3.3, the highest level since June 2020, but still down by historical comparison. .

For the single-family segment, inventory decreased 1.8 percent for the month at 1.08 million and is 0.9 percent higher than the October 2021 level (see chart two). Supply in months was 3.3, up from 3.1 in the previous month and the highest since June 2020 (see chart two). The monthly supply of new single-family homes for sale jumped to 9.2 over the past year (see chart two).

Condo and cooperative stocks rose 3.8 percent to 138 thousand, putting the months’ bid at 3.5. The supply of residential and co-op apartments is 25.0 percent higher than October 2021.

The median October sale price for an existing home was $379,100, up 6.6 percent from last year’s price. For existing single-family home sales in October, the price was $384,900, up 6.2 percent from a year ago (see chart three). The average condo/co-op price was $331,000, up 10.1 percent from October 2021.

Mortgage rates have picked up again recently, jumping around the 6.5 percent to 7.0 percent range in mid-November, well above their lows of around 2.65 percent in January 2021 (see chart three).

The combination of near-record home prices and sharply high mortgage rates has reduced housing affordability. The National Association of Realtors’ Housing Affordability Index measures whether or not a typical household qualifies for a mortgage on a typical home. A typical home is defined as the current median-priced single-family home as calculated by NAR. A typical household is defined as the average household income earner as reported by the US Census Bureau. A value of 100 means that a median-income household has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 indicates that the average-earning household has enough income to qualify for a mortgage on a median-priced home, assuming a 20% down payment. As of September, the index was stable at 96.6, below the qualification threshold (see chart four).

Housing is likely to continue to be under severe pressure as prices near a record high and rising mortgage rates reduce affordability and drive more and more buyers out of the market.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after more than 25 years in financial and economic markets research on Wall Street. Bob was previously Head of Global Equity Strategy for Brown Brothers Harriman, where he developed an equity investment strategy that combined top-down macro analysis with bullish fundamentals.

Prior to BBH, Bob was chief equity analyst at State Street Global Markets, chief economic analyst at Prudential Equity Group and chief economist and financial markets analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business Administration from Lehigh University.

Get notifications of new articles from Robert Hughes and AIER.

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *