F Forecasts

US Existing Home Sales For June Will Surprise Downward

21 July, 2021
NAHB Housing Market Index

On Thursday, the National Association of Realtors (NAR) will release the US Existing Home Sales (EHS) for June. According to the Bloomberg consensus, EHS should rebound by 1.7% MoM to 5.90 million SAAR.

β†’ My proxies suggest that EHS will disappoint the consensus:

  • Local/state reports show that, on a YoY basis, sales rose at a slower pace in June (non-seasonally adjusted: NSA) mainly due to negative base effects. Even taking into account this bias, sales are unlikely to rebound in line with expectations (+1.7%) on a MoM basis (seasonally adjusted: SA).
  • Demand was affected by a deterioration of housing affordability amid elevated prices.
  • Lack of supply kept weighting on housing transactions.

1. Local/state reports suggest that existing home sales are unlikely to rebound in line with expectations

On a YoY basis, local/state figures imply that national existing home sales (non-seasonally adjusted: NSA) are likely to have advanced again in June (12th straight rise). However, the pace of increase (NSA) was significantly lower than in May (+41.9% YoY). Several areas such as North Texas or Denver even posted a drop. This is not susprising given the negative base effect (EHS rebounded significantly in June 2020). Using my sample of local/state data and a seasonal adjustment factor lower than last year (more favorable), I expect June EHS (seasonally adjusted: SA) to remain almost stable or decline compared to May (vs +1.7% for the consensus).

2. Demand was affected by a deterioration of housing affordability amid elevated prices

Housing prices rose most in decades and squeezed a lot of first-time buyers out of the market. The latter are forced to rent rather than buy a home. Last month, the NAR highlighted that β€œThe median existing-home price for all housing types in May was $350,300, up 23.6% from May 2020 ($283,500), as every region registered price increases. This is a record high and marks 111 straight months of year-over-year gains since March 2012.β€œ Other reports confirm that the trend strenghtened in June. As an example, “Home value appreciation broke annual records for the second month in a row, growing 15% year-over-year in June – the highest in Zillow data reaching back through 1996.

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. Even though my sample of local/state reports point to a YoY fall in inventory that was lower than in May (-20.6% YoY), the current level remains historically low. This pattern (lack of offer) was sometimes cited as a dampening factor on transactions.