US DATA
Existing home sales ticked up to a seasonally-adjusted annual rate of 3.96M in October, a 3-month high and up from 3.83M prior. This is the first time since July 2021 that monthly sales have exceeded those in the same period of the year before (3.85M in Oct 2023). The National Association of Realtors provides an optimistic appraisal of this development: "The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions." But rather than any sign of recovery, the Y/Y recovery is meager, and a reflection of how consistently poor existing home sales have been for an extended period.
- Indeed this is the 5th consecutive month below the 4M mark, implying activity consistent with the depths of the Global Financial Crisis housing bust, and available inventory is slowly creeping back up: at 4.3 months of sales, for the 2nd consecutive month, for the highest back-to-back readings since September/October 2018.
- New home sales (data out next week) are expected to continue faring relatively better, helped by better underpinning financing dynamics: existing home sales activity
continues to diminish as low locked-in fixed rate mortgages deter movement, and delinquencies remain low. - The standoff between sellers and would-be buyers is underlined by the fact that prices continue to hold up, with the median of $407.2K (NSA) up 4.0% Y/Y, and average prices up 5.1% at $540.3k - so there is little evidence that sellers are blinking even as sales taper off.
- With mortgage rates still elevated (30Y conforming rates at 6.90% in the latest week, up 76bp from the September low) dampening activity, there is unlikely to be any major movement in existing home sales until either rates pull back sharply or unemployment rises, forcing sales.
- In the meantime, high prices will continue to buoy the wealth effect for homeowning households, helping underpin consumption and thereby presenting a headwind to lower interest rates in a feedback loop of sorts.
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