E — Economics

Existing Home Sales Crashed To A 6-Month Low

22 March, 2021
Existing Home Sales February


    As I expected, U.S. existing home sales surprised downward in February, hitting a 6-month low. According to the National Association of Realtors (NAR), they decreased by 6.6% MoM, reaching 6.22M (down from 6.66M prior). As I already noted, the sharp decline can be explained by several factors such as adverse weather conditions, a deterioration of housing affordability and the lack of supply.

     

     

    1. Adverse weather conditions probably delayed closings in several areas

    Local/state reports suggest that areas affected by adverse weather conditions saw a significant slowdown or a decline in existing home sales. As a matter of fact, on a YoY basis, sales in Houston (TX) grew by only 1.9% in February (down from +27.5% YoY in January). In the meantime, sales of single-family homes in North Texas were down 8% YoY as “The Texas economy practically shut down for a whole week”. These figures confirm that many home sales that were supposed to close in late February were likely pushed into March.

     

    2. Demand has been affected by a deterioration of housing affordability

    Housing affordability has been under pressure since January. On one hand, mortgage rates started rebounding with the 30-year recently hitting the highest level since June 2020. On the other hand, prices kept climbing at a fast rate. The NAR highlighted that “The median existing-home price for all housing types in February was $313,000, up 15.8% from February 2020 ($270,400), as prices rose in every region. February’s national price jump marks 108 straight months of year-over-year gains.”

     

    3. Lack of supply kept weighting on housing transactions

    One of the recent development related to the the housing market has been the collapse in inventory, which pushed prices upward. The NAR underlined “Total housing inventory at the end of February amounted to 1.03 million units, equal to January’s inventory and down 29.5% from one year ago (1.46 million). Unsold inventory sits at a 2.0-month supply at the current sales pace, slightly up from January’s 1.9-month supply and down from the 3.1-month amount recorded in February 2020. NAR first began tracking the single-family home supply in 1982.” This pattern was sometimes cited as a dampening factor on sales.