Friday Market Update: January 20th 2023

Existing Home Sales are Not as Bad as it Sounds!

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

So, Monday, this week was Martin Luther King Day. So, markets were closed, bond markets were closed. Not much to report on there. Tuesday this week was a relatively quiet news day as well. Then, it started to heat up.

Wednesday this week, we got Bank of Japan and their version of the Federal Reserve announcing they’re not going to hike rates. So, they’re not going to continue to tighten their monetary policy. We also got PPI reading on Wednesday. So, PPI stands for Producer Price Index. This measures inflation at a wholesale level. So, for the month of December, this was down a half a percent. Expectations were that this was going to only be down 1/10th of a percent. So, this is better than expectations.

On a year-over-year basis, PPI inflation moved from 7.3% down to 6.2%. So, this is a huge move and a reduction in inflation, which is really great for us to see because, you know, not long ago, this inflationary reading was at 11.7%. So, really great to see continued headway on inflation. Thursday this week, we got NHB. That’s the National Association of Home Builders. They have a home builder sentiment. This moves up from 31 to 33. So, this is a point scale. It’s on a scale of 100. Anything at 50 or above is considered growth in the market. Anything below 50 is considered contraction. So… Home builders definitely still in that area of construction, but… seeing them move in their sentiment from 31 to 33 is favorable because it’s good that they’re starting to see more traction in the new construction housing market.

And then Friday, today, we get existing home sales. So, I want to show you just what we get for existing home sales because I think this is really important for us to go through because the media is super negative and if you pay attention to the media, you’ll think the world is ending and housing is collapsing. So… This is existing home sales for the month of December.

So, existing home sales were down 1.5%. Not surprised to see this down. Why are they down? Well, if someone is closing on a home in December, they were probably shopping for a home in October or November. The apex of interest rates at their absolute highest was in November. Rates were moving up higher in October. So, I’m not surprised to see this was down because rates were much higher in October and November.

So, not shocked to see the impact in December. That’s puts us at an annual sales rate of just over 4 million. That’s still a lot of homes to be sold in the United States on an annual sales rate. Definitely, not surprised to see existing home sales down 3.4% year-over-year. You know, I went to this Boulder Economic Council yesterday and the comments there was just that there was a lot of buyer fatigue in the marketplace. And I’m not surprised to see that translating into the housing Market.

Median home price was at 367k. I don’t put a Lot of weight into this because it’s the median home price. It’s not appreciation. So, I don’t pay a lot of attention to this. What I do pay close attention to as well, though, is inventory. So, inventory was at 970,000 Units. This is down from 1.14 million. So, we’re continuing to see a decline in Inventory. We’ll look at another chart here in a moment. I’m not surprised to see that. Month supply right now is at 2.9 months’ supply. You know, normal market is 4.6 months’ supply. So, we’re still in a seller’s market because inventory is still very low and inventory crusted. It happens every single year.

So, I just want to look at this. We looked at a chart similar to this before. This is the most updated one. This is active listings across the US. And it shows you that, just like it does every single Year, you have inventory crust in April, May, June, July, because people want to buy homes and move before their kids go back to school. And then you get over that crust. You move into the fall, into the winter Months, and inventory goes down. And back here, the media was so negative. Just saying. Oh, my gosh. We’re going to see housing collapse. Housing crisis. Inventory skyrocketing. But look what happened. Oh, my gosh. Not surprising, because it happened here in 2021, 2020, 2019, 2018, 2017.

We could just keep going on and on and on and going back because this happens every single year. And here we are right now, crust of inventory coming down, and we’re going to see the same exact thing again this year because you’re going to see more inventory come onto the market as we move into the spring and summer months. So… Looking at this, we had 970,000 homes for sale. But… A good chunk of those is already pending sales. So, you really only have right now 690,000 homes across the United States for sale. And that’s based on, if you look 690K, based on the annual sales pace, we only have a two-month supply of existing home sales right now, so… or of inventory right now. So, I would say this is still a seller’s market, and I think these numbers are favorable for us.

One thing I do want to say is we really do believe that you’re going to see interest rates come down and you’re going to see rates push this 5% range. And I would say we’ll go more into this another time. Circle May 10 on your calendar. But as you move into the spring and summer months, April, May, June, July, August, you’re going to continue to see rates come down. Well, when you have low inventory numbers like we do right now, mortgage rates coming down, buyers sitting on the sidelines, you’re going to get more buyers jumping into the marketplace.

I don’t think the market is going to be like it was the last two years of people paying absurd amounts above list price. But there’s definitely going to continue to be an imbalance of supply and demand. If I was a buyer, I would be buying a house right now, because I’d be refinancing here in the near future. So, if you’re a buyer, I’m telling you, now is the time to jump into the market, not when rates hit 5% and all these buyers start jumping back in. Another thing I want to look at here is just some more info on existing home sales.

So… Across the country, average days on market is 26. Yes, it’s up a little bit. I think it was at 24 the prior month, so that’s still a really robust number. 57% of listings sold in less than 30 days. So, again, still very active. First-time home buyers… I love seeing this. First-time home buyers jumped from 28% up to 31%. This is exciting to see. Cash buyers move to 28% up from 26%. And investors still make up 16% or one out of six purchase transactions that are taking place in the US.

So… You know, I’m not surprised to see this come down a little bit for the month of December, but I think the numbers show optimism for me and what’s going to happen in the spring and summer months, because inventory is going to stay low, interest rates are going to come down, because inflation is going to cool. And inflation is the arch enemy of interest rates. And as that happens, you’re going to see more and more buyers jump into the marketplace. I’m around all weekend. If you have any questions, give me a call. If you want to get pre-approved, I’m here to help you. If you’d like to go through our strategic buyer consultation, reach out to me anytime.

Happy Friday. Have a great day!



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