Wednesday, May 23, 2018

The two most positive measures for housing remain undaunted

 - by New Deal democrat

We won't have a more complete picture of the housing market this month until tomorrow's release of existing home sales, but although they are about 90% of the total market, they are the least important economically.

What we can say is that, so far, the recent increase in mortgage rates has not dented the momentum of the new home market, at least as far as the two most positive measures -- purchase mortgage applications and new home sales -- are concerned.

First of all, although refi is dead -- it just made a new 17 year low -- purchase mortgage applications made a new expansion high in the last month. Although their rate of increase has decelerated in the past year, as shown on the graph below (h/t Calculated Risk) (sorry for the blurry quality, but I wanted to zoom in on the recent few years):

the fact remains that for all of a few weeks, this year they remain solidly positive YoY.

Second, although they declined m/m, new single family home sales have also maintained a steadfastly positive trend. The below graph compares houses sold (blue) with houses for sale (red, x2 for scale):

There is no hint of a change in direction here.

Median sales prices for new homes did plummet this month:

but this is a very noisy and heavily revised metric, and I wouldn't be surprised in the slightest to see this downturn revised away one month from now. In addition to which, prices typically follow sales, so I would not expect prices to turn down meaningfully until after sales do.

To sum up: these two have been the most optimistic ones for the entire housing market, and they remain so.