The Boock Report

Pending home sales in September fell 10.2% m/o/m and that was more than double the estimate of a drop of 4%. That’s the 10^th month in the past 11 that has seen m/o/m declines and sales are down 30.4% y/o/y. The Northeast saw the biggest drop with a -16.2% m/o/m print.

The industry is certainly challenged by people who can’t afford to buy, as we know, but also a supply issue from those that don’t want to move out of their 3% mortgage rate. The NAR did some basic math in their press release with the new 7% mortgage rate, “On a $300,000 loan, that translates to a typical monthly mortgage payment of nearly $2,000, compared to $1,265 just one yr ago.” While we know clearly what’s influencing the housing market right now, the NAR said it well, “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”

I’ll add again, the only question right now is to what extent do home prices fall from their peak or in some markets at least stop going up. In the S&P CoreLogic August home price index we saw a few days ago, home prices fell in every single city surveyed in their 20 city index m/o/m led by a 4.3% drop in San Francisco, a 3.9% fall in Seattle, a 2.8% decline in San Diego and 2.3% slips in LA and Denver. These markets also saw 1-3.5% price drops in July. I think the biggest casualty of the housing recession will be more the pace of transactions, rather than pricing, and all the collateral impacts that brings for businesses and workers in carpet, flooring, paint, lumber, real estate brokerage, legal, etc…

On the weaker data, the 10 yr yield dipped below 4% again after trading above on the upside surprise to German CPI which is driving yields in Europe much higher. Maybe also helping, the one yr inflation expectations component in the 2^nd reading of UoM consumer confidence was 5% from the 1^st print of 5.1% even though that is still up from 4.7% in September.

Pending Home Sales