US Macro Updates

Key takeaway: Existing Home Sales dropped a more-than-expected 4.1% in October to a SA annual rate of 3.79mn units. This level is now not only lower than the end 2022 lows, it is also at a 13 year low. To some extent, the decrease in EHS was expected and in line with some of the other real estate data that we have seen in the past few months. Mortgage rates had closed in on 8%. Inventory still remains low. Cumulatively, this has been stifling the existing home sales market. However, in the past 20 days of November, mortgage rates have come down in line with the sharp fall in the 10 year yield. The weekly indexes on mortgage activity also indicate some pick up. On the other hand, of late the surge of activity in the new homes market has also subsided. The overall resurgence that we had seen in the Residential Real Estate market, especially in the new building segment, seems to have plateaued. It will be key to track if activity in the real estate market trickles back again a bit the way it had in the first half of 2023. The median existing home sales price still stays resilient though (Median EHS price increased 3.4% y-o-y in October 2023). The inventory of unsold existing homes still remains tight at 1.15mn units or equivalent to 3.6 months supply. New homes construction also still seems to be holding up which can be seen from the housing starts and building permits data.

• Existing Home Sales decreased to a SA annual rate of 3.79mn homes in Oct (Expectation 3.90mn)

19th Oct 2023

Key takeaway: Existing Home Sales dropped 2.0% in September to a SA annual rate of 3.96mn units. This level is now lower than the end 2022 lows and second only to the lowest recorded level in the peak of the 2020 Covid pandemic. Existing Home Sales had been on a downward trend for the whole of 2022. After having fallen precipitously all through 2022, they had stabilized in 1H 2023. We even saw a couple of readings this year when EHS increased m-o-m. However, EHS have now fallen continuously in recent months. Mortgage rates have closed in on 8%. Inventory still remains low. Cumulatively, this has been stifling the existing home sales market. Of late, the surge of activity in the new homes market has also subsided. The overall resurgence that we had seen in the Residential Real Estate market, especially in the new building segment, seems to have plateaued. Notable, even the key NAHB Home Builders sentiment index has fallen for the last 4 months. The median existing home sales price still stays resilient though (Median EHS price increased 2.8% y-o-y in September 2023). The inventory of unsold existing homes still remains tight at 1.13mn units or equivalent to 3.4 months supply. New homes construction also still seems to be holding up which can be seen from the housing starts and building permits data.

• Existing Home Sales decreased to a SA annual rate of 3.96mn homes in Sep (Expectation 3.89mn)

21st Sep 2023

Key takeaway: Existing Home Sales dropped 0.7% in August to a SA annual rate of 4.04mn units. Existing Home Sales had been on a downward trend for the whole of 2022. After having fallen precipitously all through 2022, they had stabilized in 1H 2023. We even saw a couple of readings this year when EHS increased m-o-m. However, EHS have now fallen for the past 3 continuous months. But it has yet not breached last year’s low of 4.0mn. While the “mortgage rate lock” phenomenon continues to keep existing home owners away from the resale market, there is always a some level of demand from various categories of buyers and sellers eg. new home formations, boomers downgrading once their children have moved out of their homes, etc. Hence, the general consensus is that we are unlikely to see a freefall in the US residential real estate market. However, the overall resurgence that we had seen in the Residential Real Estate market, especially in the new building segment, seems to have plateaued. Notable, even the key NAHB Home Builders sentiment index has fallen for the last 3 months. The median existing home sales price still stays resilient though (Median EHS price increased 3.9% y-o-y in August 2023). The inventory of unsold existing homes still remains tight at 1.1mn units or equivalent to 3.3 months supply. 

• Existing Home Sales increased to a SA annual rate of 4.04mn homes in Aug (Expectation 4.10mn)

22nd Aug 2023

Key takeaway: Existing Home Sales dropped 2.2% in July to a SA annual rate of 4.07mn units. Existing Home Sales had been on a downward trend for the whole of 2022. After having fallen precipitously all through 2022, they had stabilized in 1H 2023. We even saw a couple of readings this year when EHS increased m-o-m. However, EHS have now fallen for the past two months again. But it has yet not breached last year’s low of 4.0mn. While the “mortgage rate lock” phenomenon continues to keep existing home owners away from the resale market, there is always a some level of demand from various categories of buyers and sellers eg. new home formations, boomers downgrading once their children have moved out of their homes, etc. Hence, the general consensus is that we are unlikely to see a freefall in the US residential real estate market. If viewed from this lens, it is not surprising to see the median existing home sales price still resilient (Median EHS price increased 1.9% y-o-y in July 2023). The inventory of unsold existing homes still remains tight at 1.1mn units or equivalent to 3.3 months supply. 

• Existing Home Sales increased to a SA annual rate of 4.07mn homes in Jul (Expectation 4.15mn)

20th Jul 2023

Key takeaway: Existing Home Sales dropped 3.3% in Jun to a SA annual rate of 4.16mn units. After a couple of months of slightly positive existing home sales numbers, June resumed the trend downward. Median Existing Home Sales price, on the other other hand, posted a sharp rise upward to $410K from $396K. While it is still lower than the median price a year before ($413K), the sharp increases are proof of a still tight real estate market. Total housing inventory registered at the end of June was 1.08mn units – which is roughly 3 months of supply at the current sales pace. That is still significantly below a “normal” range of 6-9 months of supply.  

• Existing Home Sales increased to a SA annual rate of 4.16mn homes in Jun (Expectation 4.20mn)

22nd Jun 2023

Key takeaway: Existing Home Sales edged up marginally in May (+0.2%). However, the more important aspect to consider is that a bottom seems to have formed in the existing home sales market. At a SA annual rate of 4.3mn units, EHS is now off the January lows of 4.0mn annual units. There was a drop in “Days on Market” too (18 days in May compared to 22 days in April). The story of shortage of homes in the US market continues and it is driving activity in the new home sales market. Existing homes inventory continues to be low at 3 months supply compared to a pre-pandemic normal of 6-8 months. 

• Existing Home Sales increased to a SA annual rate of 4.3mn homes in May (Expectation 4.25mn)

18th May 2023

Key takeaway: After an exceptional and unusual rise in Feb, Existing Home Sales resumed their downward trend in March and continued that trend in April. Existing Home Sales fell a substantial 3.4% month over month in April to a seasonally adjusted annual rate of 4.28mn units. This is 23% lower from one year ago. The story remains the same. Mortgage rates have increased substantially from last year. Existing home owners are not motivated to upgrade homes since they would have to get in on a new higher mortgage rate. This is resulting in falling inventory of existing homes and a cascading effect in the number of transactions in the existing home market. The last time Existing Home Sales was this low was at the beginning of the 2008-09 recession. However, it is also equally important to note that the April number of 4.28 mn is off this current cycle low of 4.0mn in Jan 2023. The overall residential home market has staged a spectacular recovery this year led by the new home sales segment. Ironically lower inventory in the existing homes market has been driving more activity in the new homes market. Median existing home sales price dipped 1.7% from previous year to $388.8K. This is the 3rd month in a row that the median home price for existing homes has fallen on a y-o-y basis (after 11 continuous years of price increases). However, it is also key to note that the median house price increased on a m-o-m basis. Lastly, inventory at 1.04 mn units remans historically low – at 2.9 months supply at current sales pace.

• Existing Home Sales decreased to a SA annual rate of 4.28mn homes in Apr (Expectation 4.30mn)

20th Apr 2023

Key takeaway: After an exceptional and unusual rise in Feb, Existing Home Sales resumed their downward trend in March. It is worth remembering again that prior to the Feb rise, EHS had fallen m-o-m for the past 11 months. The story remains the same. Mortgage rates have increased substantially from last year. Existing home owners are not motivated to upgrade homes since they would have to get in on a new higher mortgage rate. This is resulting in falling inventory of existing homes and a cascading effect in the number of transactions in the existing home market. Ironically this is driving more activity in the new homes market. (To read more on this check the blog page on this website). Also, the median existing home sales price dipped 0.9% from previous year to $375.7K. This is the 2nd month in a row that the median home price for existing homes has fallen on a y-o-y basis (after 11 continuous years of price increases). However, it is also key to note that the median house price increased on a m-o-m basis. Lastly, inventory at 980K remans historically low – at 2.6 months supply at current sales pace.

• Existing Home Sales decreased to a SA annual rate of 4.44mn homes in Mar (Expectation 4.50mn)

21st Mar 2023

Key takeaway: On the heels of a week that has made the Fed’s decision more complicated, Existing Home Sales only added to their discomfort. EHS jumped a massive 14.5% in February from January to a SAAR of 4.58mn units. EHS recorded in Feb would have typically been signed in Dec or early Jan when rates had come off their highs. Consensus expectations were for growth in EHS to be recorded in both Jan and Feb. Instead, EHS recorded a fall in Jan and subsequently this large rise in Feb. Mortgage rates had then spiked up again in Feb and we might see the effect on EHS in subsequent months EHS. It is also worth noting that the growth in EHS was across all regions. Median price of EHS fell 0.2% y-o-y to $363K. This is the first fall in EHS median price recorded in the last 11 years! Housing inventory stands at 980K units or 2.6 months supply – still far from a healthy market range.

• Existing Home Sales increased to a seasonally adjusted annual rate of 4.58mn homes in Feb.

21st Feb 2023

Key takeaway: Existing Home Sales fell for the 12th straight month in January to a SA annual rate of 4.0mn units. This was a fall of 0.7% from the previous month of December and 37% from one year ago. The consensus estimate was for a growth of 2% to a SA annual rate of 4.10mn. While the small downward change does not signify a material shift on a m-o-m basis, the bottomline of the real estate sector in the US is that activity in the single family residential space has substantially fallen from peak levels. In late Dec and early Jan, mortgage rates had reduced the peak rates reached in Q4 2022 and there was a marked improvement noted in other housing market indicators – like weekly mortgage applications, home builder sentiment, etc. This was the reason EHS was expected to have ticked up a bit as well. Instead, the reading was a further fall from the already depressed levels. What is interesting to consider is that in the recent 2 weeks of Feb, mortgage rates have climbed back up again in line with the move up in treasury rates. This continues to pose a headwind to the real estate sector. Finally, even though EHS transactions have cratered, new listings by home sellers continue to be very soft resulting in an ongoing demand supply imbalance causing prices to remain elevated. Total housing inventory improved marginally from Dec to 980K units in Jan, but that is still about 2.9 months supply only!

• Existing Home Sales declined to a seasonally adjusted annual rate of 4.0mn homes in Jan.

20th Jan 2023

Key takeaway: Existing Home Sales fell for the 11th straight month to a SA annual rate of 4.02mn units. This was a fall of 1.5% from the previous month of November and 34% from one year ago. However, the more nuanced aspect to know about this month’s release was that it beat consensus expectations on the upside – only marginally though. Why is this important? Over the past month or so, real estate industry data has generally improved a bit. New home sales unexpectedly improved in October and November. The NAHB Index improved in January when it rose 4 bps from 31 to 35, exceeding median expectations again. The average mortgage rate in the US has fallen from a high of plus 7% in October to about 6% now. Finally, even though EHS transactions have cratered, new listings by home sellers continue to be very soft resulting in a ongoing demand supply imbalance causing prices to remain elevated. Total housing inventory fell 13.4% from November to 970K units in December. Unsold inventory hence now sits at 2.9 months supply compared to 3.3 months in November! 

• Existing Home Sales declined to a seasonally adjusted annual rate of 4.02mn homes in Dec.

21st Dec 2022

Key takeaway: Falling transactions and prices holding up ! This dual-faced story continues in the US Real Estate market. Even though transactions have been precipitously falling, prices are not falling meaningfully and inventory still remains significantly low. EHS fell 7.7% from October to a seasonally adjusted annual rate of 4.09mn units in November 2022. This is the lowest level of EHS since December 2011 (barring the two months of Covid). And this is the 10th consecutive monthly fall in sales. Median house price still remains high at $371K – 3.5% higher than Nov 2021. However, on a month on month basis, it has remained quite unchanged.  The inventory of unsold existing homes fell for the 4th consecutive month to 1.14mn homes – equivalent to 3.3 months supply !

• Existing Home Sales declined to a seasonally adjusted annual rate of 4.09mn homes in Nov.

18th Nov 2022

Key takeaway: The dual-faced story continued in the US Real Estate market. Even though transactions have been precipitously falling, prices are not falling meaningfully and inventory still remains significantly low. EHS fell 5.9% from September to a seasonally adjusted annual rate of 4.43mn units. This is the lowest level of EHS since December 2011 (barring the two months of Covid). And this is the 9th consecutive monthly fall in sales. Median house price still remains high at $379K – 6.6% higher than previous October. The inventory of unsold existing homes fell for the 3rd consecutive month to 1.22mn homes – equivalent to 3.3 months supply !

• Existing Home Sales declined to a seasonally adjusted annual rate of 4.43mn homes in Oct.

20th Oct 2022

Key takeaway: Even though Existing home sales have been consistently falling in the past few months, there are still nuances to this story which play an important role in the fight against inflation. Firstly, the fall is EHS has levelled off a bit in the last 3 months. (currently about 4.7mn annualized). Second, even though EHS are falling, home prices are still not falling meaningfully (still up 8% y-o-y). Lastly, existing home inventory still remains extremely tight (at 3.2 months equivalent) which makes a large fall is home prices that much more difficult to occur. In fact the inventory of existing unsold homes fell for the 2nd month in a row. At the end of the day, Shelter inflation is literally the most important and sticky component of the CPI basket!

• Existing Home Sales declined to a seasonally adjusted annual rate of 4.71mn homes in Sep.

21st Sep 2022

Key takeaway: Existing home sales got a bit of a respite in the August release. EHS notched a minor contraction from July of 0.4% to a SA adjusted annualised number of 4.8mn. This was above a consensus estimate of 4.7mn. Nonetheless, Aug marks a 7th continuous month of decline. Total housing inventory still remains fairly tight at 1.28mn units. Unsold inventory sits at 3.2 months supply. Also, remember that these numbers mostly pertain to contracts signed in June and July when the 30 year mortgage rate had climbed up to 5.5-5.8%.

• Existing Home Sales declined to a seasonally adjusted annual rate of 4.8mn homes in Aug.

18th Aug 2022

Key takeaway: Housing recession is centerstage on everyone’s mind now. Existing home sales are now at a multi-year low 4.81mn. To provide some context, the 2018-19 low was 4.93mn (remember this was the last “fed pivot” timeline). On the other side of the spectrum the 2005 high was 7.25mn. This data point should also be viewed together with other cascading housing metrics of new home sales, mortgage applications, etc. 

• Existing Home Sales declined to a seasonally adjusted annual rate of 4.81mn homes in July.

20th Jul 2022

Key takeaway: Existing Home Sales fell to a 2 year low in June. An annualized rate of 5.12mn. Sales were down 5.4% from May. This was the fifth straight month of decline. 

• Existing Home Sales declined to a seasonally adjusted annual rate of 5.12mn homes in June.

21st Jun 2022

Key takeaway: Existing-home sales declined for the fourth straight month to a seasonally adjusted annual rate of 5.41 million. Sales were down 3.4% from April and 8.6% from one year ago. At $407,600, the median existing-home sales price exceeded $400,000 for the first time and represents a 14.8% increase from one year ago. The inventory of unsold existing homes rose to 1.16 million by the end of May, or the equivalent of 2.6 months at the current monthly sales pace. 

• Existing Home Sales declined to a seasonally adjusted annual rate of 5.41mn homes in May.