- by New Deal democrat
I’ll discuss this morning’s producer price index release later. First, though, let me catch up on yesterday’s report on existing home sales for October.
For the last three years, the market for existing homes has been rangebound, first in sales, then in prices, and finally this year in inventory as well, in what I have described several times as a “suboptimal equilibrium,” since existing homes have been unaffordable compared with any time outside of the housing bubble before the pandemic. Last month I concluded that, downstream of the increase in interest rates, September might be the last month for this equilibrium.
And it was, as existing home sales broke out of their three year+ range of between 3.85-4.30 million units annualized, declining a seasonally adjusted -5.5% monthly and -8.8% YoY to 3.75 million annualized, the lowest level in over 10 years:
Downstream of sales, prices on a YoY basis (which are not seasonally adjusted, so this is the best comparison) have been relatively calm as well. Since February of 2025 there has been no YoY comparison higher than 3.0%, and in October there was the lowest such comparison since, up only 0.4% YoY from $420,200 to $421,900:
The most lagging metric, inventory, is still increasing, although tepidly. In October, the YoY% change in existing home inventories increased by 4.6%. As shown in the below graph, this year’s inventory has been the highest since the pandemic, but still below its 2016-19 baseline by about 500,000 units:
As I have been saying all year, until this inventory shortage is taken care of, the housing market will continue to be tight, and largely unaffordable for new buyers.
But the big takeaway has to be that the equilibrium has broken to the downside, along with most of the financial long leading indicators. It remains to be seen whether the crucial non-financial long leading indicators (corporate profits and real retail sales per capita) follow suit.
