Existing Home Sales Preview: A Crash Is Coming

Tuesday, January 22, 2019
By Paul Martin

by Tyler Durden
Tue, 01/22/2019

Amid a government-shutdown-driven dearth of macro data, this morning offers a tasty morsel to feed the hungry and hopeful masses as existing home sales (EHS) is due to print.

According to the Bloomberg consensus, EHS should decrease by 1.5% MoM to 5.24M, after having reached a 3-month high in November.

However, Market Securities’ Chief Economist/Strategist Christophe Barraud is convinced that EHS will surprise on the downside due to both fundamental and transitory factors.

In detail, buyers signed contracts in November for most December sales. During this period, 30-year mortgage rates peaked (highest since March 2011), limiting spending power in a context where prices had been rising by more than 5% YoY since August 2015. Looking at supply, on a YoY basis, inventory has rebounded since August 2018 and buyers have taken more time to choose.

At the same time, weather conditions remained adverse in November while the government shutdown started to affect the housing market in December by delaying the closing of several transactions.

1. Local data showed that the decline was broad-based across the country with significant decrease seen in North East Florida (-16.0% YoY), Las Vegas (-17.0% YoY), Kansas City (-17.2% YoY) and Denver (-23.0% YoY).

On average, local data that I gathered show a fall of 11.7% YoY, which looks coherent with results from other data providers such as Redfin (-10.7% YoY) or Remax (-12.1% YoY). According to my calculation, it implies a seasonally adjusted statistic of 4.99M (which would be the lowest since November 2015).

The Rest…HERE

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