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May 20, 2016 | Existing Home Sales Solid, Not Spectacular; Be Careful With Year-Over-Year Comparisons

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Existing home sales bounced in April as expected. Compared to pre-recession totals, sales look weak, but compared to the last couple years, sales are towards the top of the range.

Existing home sales rose at a seasonally-adjusted annualized rate (SAAR) of 5.45 million vs. Bloomberg  Econoday expectations of 5.40 million.

Highlights

Progress in the housing market is slow but steady. Sales of existing homes rose 1.7 percent in April to a 5.45 million annualized pace and are up a very solid 6.0 percent from April last year. Prices are also up, with the median 5.0 percent higher in the month to $232,500 for a year-on-year gain of 6.3 percent. These are not earth shattering but they are at the very top of other growth rates in the economy.

The strength in prices is driving more homes into the market, to 2.14 million in April for a 9.2 percent gain. Still, year-on-year inventory is down 3.6 percent which is a significant factor slowing sales. But April definitely shows improvement with supply relative to sales at 4.7 months vs 4.4 months in the prior two months.

The Midwest is a top region right now for existing home sales, up 12.1 percent both on the month and the year. The Northeast shows a 2.8 percent monthly gain and a leading year-on-year rate of 17.5 percent. The South slipped in the month and but is still up 4.3 percent on the year while the West is a worry, down 1.7 percent in the month and the only region in decline on the year, at minus 3.4 percent.

Sales on the new home side of the market have been showing a similar pattern, respectable gains that however are being held back by lack of supply. Housing may not be storming into the Spring selling season but the sector still looks to contribute to what is expected to be a good second quarter for the economy as a whole.

Existing Home Sales

Bloomberg offered a reasonable assessment overall, although progress is anything but “steady”. And once again, Bloomberg makes too much of the year-over-year comparisons.

Home sales are up 6% year over year. In June and July I expect they will be down.

Sales this month are near the top of the range over the last year, but it’s been a pretty choppy year. Month-to-month sales show no real trend.

“Fred” only has data to 2013. It looks like this.

Existing Home Sales 2016-05C

Be careful with year-over-year comparisons. Sales are simply too volatile.

Mike “Mish” Shedlock

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May 20th, 2016

Posted In: Mish Talk

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