Friday Market Update: April 21st 2023

March Home Sales & Inventory Still at Record Lows

Happy Friday! Brian Manning here with the weekly update. Let’s get right to it.

So, Monday this week, we got some feedback from Cass Freight. We get the Cass Freight shipping index. These tracks goods moving around the US, and the cost of goods. So… amount of shipments moving around the US in the month of March was down 4%, and the cost of shipping was down 1.5%. So, this is what we’re seeing for deflationary pressure in the marketplace, which is good.

We’ve talked about this in the past. Inflation is the arch enemy of mortgage rates. As we start to see inflation and costs comedown, it’s going to help mortgage rates move lower. The cost of shipping goods a year ago is at 8.3%. So… to see that number continue to come down on a month-over-month basis was really good.

Tuesday this week, we got some builder info and new construction. So, single family starts, we’re up 2.7%, which is great to see. Single family permits were up 4.1%. So, you’re starting to see some more activity in the new construction market. Single family residence completions were up 2.3%. Typically, new construction transactions make up around 10% of home sales. Right now, they’re at about 30%. So, you’re definitely seeing more and more new construction transactions taking place, probably because there’s a lot of incentives right now to purchase a new construction home. And there’s probably just more available because as we’re going to look in a moment, inventory in general for resales is just down.

And then, we also get a reading of builder confidence. Builder confidence was up. The low of builder confidence was in December of 2022. So, it’s good to see a continual rise in builder confidence.

Wednesday this week, we had Fed Voting President James Bullard on parade, talking about his thoughts on the economy. He says it doesn’t mean the economy is weak yet. He thinks that the job market is super robust and that the Federal Reserve should hike rates three quarters of a percent in their next meeting and then, continue hiking rates from there. This guy is completely disconnected. I have no idea where he’s looking. I don’t know why he thinks the job market is as strong as it is.

I don’t know about you, but everywhere I look in the news I’m seeing information about companies and layoffs. So, it just always feels like there’s little bit of a disconnect there. You know, he’s probably somewhat of an outlier, excuse me, in his Fed president opinion, But… You know, it moves markets. When you have a Fed president out there talking about three quarter percent rate hike, there was an impact to interest rates this week from that.

But we got to move forward into next week and get more data and really get into that May 10th CPI report that we’ve been talking about. Thursday this week, we get existing home sale Let’s look at some information here on… existing home sales and just housing market info in general.

Let’s see. So, we had existing home sales. This is for the month of March. So… Inventory remained very low. In the month of March is at 980,000. This is the third straight month. The thing I know about available inventory is that about 40% of these homes are already under contract to be sold. So, they’re actually pending. So, this is actually not the true number.

Keep in mind, back in 2007, available inventory was at 4 million homes. So, nothing like 2007. Totally different. Month supply is at 2.6%. That’s unchanged. That’s good to see. A normal balanced market is at 4.6 months. So, it’s still going to be what we consider a seller’s market. Days on market is at 29 days. This is down from 34. So, you saw some changes there. 65% of all transactions sold in 30 days or less. That’s up from 57%. So that’s really good to see. First-time home buyers make up 28% of all purchase transactions. I’d really love to see it a little bit higher. I’d love to see that in the 30% to 35% range, but that’s moving along. Cash transactions make up 27%. An investor is still making up 17% or one out of six purchase transactions. So, still a lot of investor activity there.

Then, we had a report from Redfin. You know, the media can always get a hold of these reports, make it super negative. Redfin came out and said home prices fell 3% in March. It is the biggest annual drop in a decade. But let’s look at this. First of all, it seems a little misleading because they’re looking at the median home price. Median home prices rose 3.6% in March. But yeah, they’re down on a year-over-year basis. So, you have median home price up 3.6% for the month, but you have them down on a year-over-year basis. It’s just some tough comparisons compared to last year. But we had new listings fall 23% on a year-over-year basis. Right now, new listings are the lowest number on record. So, you know, purely just looking at supply and demand, there’s just an imbalance of supply and demand right now.

Even though mortgage rates are higher than they were a year ago, you have less availability of inventory out there in the marketplace. You still have strong buyer demand. So, the housing market is still resilient and doing really well because of this. And you had 44% of homes that had multiple offers. So, there’s still a lot of activity out there in the marketplace. And it’s pretty crazy what we’re seeing.

But if you look at median home price… So, this is from National Association of Realtors. This looks at the median home price on a year-over-year basis all the way back to 2012. Every single year you see median home price peak typically in the month of June. And then you always have them come down and rebuild back up. So, yeah. So, you know, that’s why you saw median home price in the month of March increase, right? Because this is where we are right now, seeing an increase. If you compare it to last year, is it lower than last year? Yeah. But first of all, look at the median home price from 2012 through now, which has been on the rise, and look at the median home price this year. You’re starting to see it rise. So, I’d say we need to look at this report again in June and see if Redfin is still accurate about this, because… every single year, year after year after year, from 2012 on, you see the median home price peaking in June. So, it feels like we’re kind of on that general trend right now.

Once again, you hear me say this. You have to watch out the media and the negativity that’s out there, because if you really dig deep on the housing reports right now, housing is strong and housing is resilient. If you look at what’s happening, there’s a lot of data out there that’s showing signs of a recession in the US. Economy. But… the silver lining in a recession is that they’re usually housing friendly and mortgage rates come down. And we’re going to start seeing that here in the near future. And I’m just not surprised that we’re seeing negativity in the housing market right now because the media will grab onto anything. I’m around all weekend. If you have any questions, let me know. If you want to learn how to close a purchase transaction in 10 days, give me a call. I’d love to help you. 

Happy Friday. Hope you have a great day.



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