Pending Home Sales
Pending home sales in March fell .8% m/o/m, about in line with the estimate and follows a 5.5% rise in February which was likely goosed by the mild winter. The Chief Economist of the NAR was ebullient on the spring housing season saying “home shoppers are coming out in droves this spring and competing with each other for the meager amount of listings in the affordable price range. In most areas, the lower the price of a home for sale, the more competition there is for it. That’s the reason why first time buyers have yet to make up a larger share of the market this year, despite there being more sales overall.” As to the NAR’s comment on a surge in shoppers, Redfin had its own measure on Tuesday and their Housing Demand Index fell 14% m/o/m in March but still said it was the strongest March since 2013. They also cite the lack of inventory “constraining the options for interested buyers.”
Bottom line, we would see more sales if we had more inventory but the area of the market that needs more inventory, the lower end, is not getting it. We’ve discussed for a while the high cost of labor, lots and permits limiting the supply of new homes priced below $250k and now we can add higher lumber costs because of the tariffs slapped on Canadian lumber. The issue this is causing of course is continued robustness in the pace of home price increases which is great if you are a seller but is brutal if you want to buy. The NAR said “at some point – and the sooner the better – price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen.” The builder etf is unchanged on the in line number while XHB is down but after 8 straight days of gains.
Below is the chart on the Pending Home Sales index going back to 2003 and you can see we are still 12% below the ’05 bubble peak.
After the flood of economic data today, the Atlanta Fed has lowered their Q1 GDP estimate to just .2% vs .5% in their last update on April 18th. Any wonder the yield curve has flattened?