Existing Homes Sales are on the Rise!
Happy Friday! Brian Manning here with the weekly update. Let’s get right to it. First of all, I have to say, I’m so stoked for summer. I love summer. You know, I’m from Florida. I’m just a flip flops and bathing suit kind of guy, and… couldn’t be happier to have some warm summer days. But let’s talk about what’s going on in the market.
So… Monday this week, markets were closed in honor of Juneteenth. So, all financial markets were closed. Tuesday, we got housing info. This is based on new construction. This is housing start. So, this is builders starting new projects or new homes. And this was up 21.7%, which is a very large increase. This puts us at an annual pace of new construction homes at 1.63 million, which is really great to see. But what this also proves… is that builders are now more and more confident in the housing market because they’re seeing very low inventory on their resale level. And when there’s still an imbalance of supply and demand, builders see lower inventory on their resale level. They’re boosting their housing starts and permits on new construction. So, really great to see that.
We also got NAHB builder sentiment. So, this is a National Association of Home Builders. Builder sentiment is kind of like, what is the opinion of home builders just in the housing market and looking forward? And this was up 5 points to 55. So, this is on a scale from zero to 100. Anything above 50 is considered expansion. Anything below 50 is considered contraction.
So… Now, we’re starting to see more and more positivity from builders. You’re seeing more housing starts. So, this is really good to see expansion territory there. On Wednesday this week, we had Jerome Powell speaking in front of the House Financial Services committee. Didn’t really say much that we’re shocked about. It’s kind of a mixed bag right now. You know, they’re talking about a couple more rate hikes here in the future. Some people believe them, some people don’t. We’ll have to wait and see what happens.
As inflation continues to abate and inflation becomes more and more under control, it’s really hard for me to predict that the Federal Reserve is going to continue to hike rates. But… These are the same people not long ago were begging for inflation, and here we are. So, it’s really hard to tell.
We also got PPI report. This stands for the Producer Price Index. That was on Wednesday of this week. So… This is down to 1.2%. This is a report that just gets no respect. You know, this was at 11% not long ago. So, what this says is, on a wholesale level, the cost to produce goods is down.
Well, what happens is, when on a wholesale level, cost to produce goods declines, typically, that’s going to get passed on to us as consumers because the cost to produce goods costs less, which means that costs for us as consumers cost less. And this is deflationary pressure. So, this does lag typically in the CPI report. The reason why it lags because such a large component of the Consumer Price Index report is going to be rents. It’s like 43, 44% and rents are lagging by about twelve months. But this is really good to see and it’s probably just going to show to us that we’re going to have continual easing of inflationary pressure.
Then we got CoreLogic on information on rents. This is for the month of April. This showed that rents were only going up at 3.7%. Prior month they were going up 4.3%. So, we’re still seeing calming in the rental market. Again, this is going to help us with inflation because this is such a large component of the inflationary reading and the CPI report. They continue to see rents come down is only going to help us, which will translate to lower interest rates for all of us in the future.
Thursday this week, I was super excited to get this report. We got the existing home sales report. This is for the month of May. Closings were up 2/10th of a percent across the country, but analysts’ expectations were that closings would be down 1%. So, it’s pretty amazing to see that, you know, analysts expecting decline in the housing market and here, we were up 2/10th of a percent. At this level, this is an annualized pace of home sales at 4.3 million sales.
Any realtors out there watching this when you’re worried about the market and not having buyers or sellers to work with, annualized pace 4.3 million transactions, annualized taking place across the country. There’s business out there, you just got to go look for it. Also, we got inventory. Inventory levels pretty much remain flat. They’re at about a million homes. Again, a good portion of those is going to be pending and under contract. So, it’s not a million homes that are for sale.
What’s important to look at at inventory levels is that we’re at half the numbers of where we were pre pandemic levels. So, inventory is still extremely low. It’s still a seller’s market. There’s still an imbalance of supply and demand. Also, days on market declined. It’s down to 18 days and the prior month it was at 22. The prior month before that was at 29. So, now, we’re still seeing tight inventory, buyers in the marketplace that are really settled into where interest rates are at, less inventory to choose from, homes selling faster.
Now, we’re down to 18 days on market. So, we’re still seeing strength and resilience in the housing market, which is super exciting to see. Not a lot to talk about today. Everything’s really going to push in the next week where we get the next inflation report, which is the PCE. That is the personal consumption expenditure. That’s the Federal Reserve’s favorite gauge of inflation. So… We’re going to look forward to next week and see what happens there.
I’m around a weekend. If you have any questions, let me know. If you want to learn how we’re closing purchase transactions in 10 days, give me a call. I’d love to help you.
Happy Friday. Hope you have a great day.
-Brian
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