February Existing Home Sales Exceed Expectations
Happy Friday! Brian Manning here with the weekly update. Let’s get right to it. Monday this week, just a lot of talk about the banking system. And really, all week long, just lots of talk about the banking system. If you look at SVP with the amount of accounts that had balances over $250,000 that weren’t initially insured, probably one of the causes to create the run on the bank. You have the Federal Reserve come in and save all of those depositors, which is good to see. but then you have some conflicting information.
One day, you had Jenny L. saying there’s no guarantee they’d be able to insure everyone. The SVB was maybe a one off, and then they’re saying, oh, no, we got everyone covered. What’s interesting to look at is that in the US banking system, there’s $17 trillion and about $10 trillion are in uninsured accounts. So that means you got $10 trillion in accounts with balances over $250,000, and you got $7 trillion in insured accounts. So… So, definitely, makes sense why consumers, investors, etcetera, are just nervous about banking in general.
Tuesday this week, we had existing home sales. Let’s look at some feedback here of what we got for existing home sales. So… So, first thing we got to look at, you got to watch out and the media… We’ve looked at this before. Existing home sales reports come out. Then you get feedback on appreciation, and you get, you know, Diana… They’re talking about negative appreciation or just, you know, home prices having gone down. You know, what’s interesting is you’ve had multiple years of straight appreciation, but what they’re missing or what she failed to bring up is that this was the median home price, and the median home price was only down 2/10th of a percent which after ten years in a row of going up is pretty negligible. And we’ll look more at what the median home price means in a minute.
But on a month-over-month basis, the median home price is actually up 1.3%. Year-over-year, okay, it was down 2/10th of a percent. But this is not appreciation. This is the median price. If you look at appreciation right now, the real data, and we get more data on this next week, FHFA says homes are appreciating at 8.4% year-over-year basis. So, FHFA are homes across the country with conventional mortgages on them.
And then you got Case-Shiller saying on a year-over-year basis, home appreciation is up 5.8%. So… You got to watch the media, be careful with what you’re watching or reading there because they’re not always correct. So… Median home price, this is not home appreciation. So, let’s just say you have, you know, five areas of where home sales take place. Zero to 100K, all the way up to a million, and you have all sales that take place in, say, column 1, 2, 3, 4 and 5.
So, if you have homes appreciating everywhere but more sales. So, majority of your sales are below this middle line. So, majority of your sales are taking place between zero to 100k, and a 100k to 250k, and less sales are taking place at the higher end, then that’s going to skew the median home price, and that’s going to have the median prices coming down. But again, this is not appreciation.
This is looking at where are the homes selling, what is the line in the middle, and how many homes are selling above this and how many homes are selling below this. So, if you have a lot more lower price home selling, that’s going to impact median home price. But again, 2/10th of a percent. Not worried about it. Existing home sales for the month of February, this is actually a really strong report, way stronger than we expected.
So, existing home sales in February were up 14.5% on a month-over-month basis. That’s amazing to see. Expectations was that it would be up 5%. So, really good to see there. This is going to give us 4.5 million purchase transactions on an annual pace. Do you hear that mortgage lenders or Realtors out there? 4.5 million, that’s a lot of purchase transactions that are going to go through the country this year. Also, this was originally down 37% year-over-year. Now, it’s down 22%.
So, yeah, we know that there’s less sales taking place. We’re not going to question that. But we also know that inventory is really low. But to see this up 14.5%, unbelievable. Inventory unchanged on a month-over-month basis. Inventory was at 980,000 units. Yes, this is up 15% year-over-year. We’ll look more at that in a second. If you compare this to 2007, at this time in 2007, there was 4 million homes for sale across the country, and now, we’re at 980,000.
So, if you look at the 980,000 homes for sale, that’s only 2.6 months’ supply. An average market is at 4.6 months’ supply. So, we’re still looking at what’s going to be considered a seller’s market. But what’s interesting… if you look at inventory, okay, we’re at 980,000 homes for sale. We’re up 15%, but this is from the all-time low last year. If you look at this chart for the last five years, look at where inventory has been in the last five years.
So, okay, we’re a little higher than we were. We’re still at record lows. I’m still seeing multiple offers. I’m still seeing some home selling for above list price. I’m not worried about inventory because we actually need more inventory. Being down or being up 15% is nothing. I wish we were up more so that we can get more inventory out there for our buyers. So, looking at these numbers, not worried about it.
Also, existing home sales, if you have 980,000 homes for sale across the country, a portion of those are already pending and under contract. So, if you actually look at active available listings across the country right now, it’s only 578,000 homes for sale. Again, 2007, 4 million homes for sale. Right now, available homes for buyers, 578,000. So, if you look at available homes, we only have 1.5 months’ supply of active inventory. So, very low numbers. If we look at existing home sales, just some more info, average days on market was 34 days. 57% of homes sold in 30 days or less.
So, we’re still seeing a lot of activity there. Home selling very quickly. First time home buyers made up 27%. That’s down from 31. You know, we’ve been in this like 27% to 32% range for quite a while. Cash buyers down a little bit. Cash buyers made up 28% of all transactions, down from 29. Investors made up 18% of all transactions. So, still one out of five purchases are investors.
Wednesday this week was Fed day. So, you had the Federal Reserve meeting on Tuesday and Wednesday. At the end of their meeting, you have Jerome Powell in his speech as expected, he hiked rates a quarter percent. Originally, it was thought he’d hiked rates a half a percent. Then you have some debacle right now in the banking industry. A lot of people think they shouldn’t have hiked at all. We should be waiting to see what happens.
You know, we’ve had a lot of rate hikes over the last year. We should probably sit back and wait a minute, but they hiked for a quarter percent. This was the first time in his speech, so, that he finally acknowledged that rents are coming down. If we look at the consumer Price index, we’ve talked about this a lot, the cause of inflation and that rents are a very large portion of this. It is like 42, 43% of the CPI.
So, Federal Reserve finally acknowledging that rents are coming down. Again, as rents come down, as inflation comes down, mortgage rates will come down. So, across the board, we’re seeing everything calming down. This is definitely going to lead to lower mortgage rates.
We also got new home sales. This is for the month of February. Signed contracts for new home sales. This is new construction was up 1.3%. Expectations was that it would be down 3%. So, really good to see that. If you look at inventory, yes, new home sales inventory right now, so, builder inventory is at 436,000 homes, but… only 73,000 of those are completed and able to be purchased. So, new builder inventory right now is only at really a 1.4-to-1.5-month supply. So, inventory levels are tight everywhere.
As you proceed through this year and mortgage rates come down, it’s still going to remain a seller’s market. You’re going to see tight inventory, more buyers jumping into the game, and it’s still going to be a challenging market for the rest of the year. Today is a pretty quiet day, although markets are being ruffled by Deutsche Bank. So, you have Deutsche Bank running into some challenges as well. Unfortunately, we talked about this a second ago, when you have global banks around the world, Federal Reserve type banks hiking rates as fast as it did over the last year, it’s going to put some cracks into the banking system. We’re starting to see what’s going to happen.
This is going to take a little while for it to unfold on us, but now, we got to keep an eye on Deutsche Bank and see what takes place there. I’m around all weekend. If you have any questions, let me know. If you want to go through our pre-approval process, give me a call. Right now, we’re closing purchase transactions in twelve days. If you want to go through our strategic buyer consultation, learn how to compete with cash offers, close in twelve days, give me a call. I’d love to help you.
Happy Friday. Have a great day!
-Brian
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