Existing home sales crush housing bears – again

The National Association of Real Estate AgentsThe existing home sales report for September came in at an excellent pace from estimates to 6.29 million. Now that we’re only 10 days away from Halloween in 2021, we can all laugh a little bit about how wrong the 2020-2021 housing bears got it wrong. Especially all those crazy cats on YouTube predicting housing collapse in 2021 because of abstention.

Don’t worry, however, I’ve heard that some have moved their crash to 2022 or to an undisclosed location. Remember to believe in the people who believe in business models and dare to forecast every year. Economics well done should be boring. Never forget: you want to be the detective, not the troll.

So far this year, every existing home sale impression has been higher in 2021 than the closing sales level in 2020, which was 5.64 million. With only three reports remaining in the year, we can safely say that existing home sales in 2021 will be above 2020 levels. Additionally, 2020-2021 will have more home sales from mortgage buyers than any other year. 2008-2019. It seems perfectly normal to me.

One thing about this report is that it is better than the sales trends I was looking for in 2021. Earlier this year, I wrote: “The rule of thumb I’m using for 2021 is that sales of existing homes, if they are doing well, should be between 5,840,000 and 6,200,000. That, for me, would be considered a good year for housing. .

A big theme of my work since last year has been to talk about how housing data is going to moderate because the surge in COVID-19 demand was just a demand for compensation. When the data is moderated, we’ll find a foundation to work from and take it from there. This happened just for 2021. This type of action, to me, is no surprise. I believe what happened is that a lot of people who usually inhabit crash bears saw moderation as a terrible weakness and went into cult crash mode and blew it up.

I had forecast a few draws under 5.84 million, but we’ve only had one lower report so far. So, overall, 2021 is shaping up to be good for the existing home sales market. If we don’t see circulation below 5.84 million, I would consider it a slight overshoot in demand this year.

The main reason housing performed better in the 2020s and 2021s is that we have just received a simple boost in demand from the largest housing demographic in history, as the 27-33 year olds are the most important group of all time. Then when you add up home buyers, downs, cash, and investors, we should still be able to have the total home sales – new and existing – at 6.2 million or more. This is something that could not have happened in the years 2008-2019. So far 2020 and 2021 are looking good.

Of course, like anyone who has business models for their work, one should look for deviations from the model. For housing in the years 2020-2024, housing had the capacity to outperform unlike the years 2008-2019. One of the concerns was that if house prices exceeded the cumulative growth of 23% over the period 2020-2024, then that would be a red flag. Of course, what we have seen in 2020 and 2021 is unhealthy growth in house prices, so all is not rosy in housing. For my part, I wish the growth in house prices would slow down, which would be the best thing for the housing market.

Of NAR: The median price of existing homes for all housing types in September was $ 352,800, up 13.3% from September 2020 ($ 311,500), as prices rose in every region.

One data set that I like to keep tabs on is what I want to see in the (boring and balanced) B&B housing market progress is growing the market for days. However, being a teenager is not a healthy sign; we want the days to grow and cool this market to give people more choice.

Of NAR: First-time buyers represent 28% of sales; Individual investors bought 13% of homes; Cash sales represented 23% of transactions; Distressed sales represented less than 1% of sales; Properties typically stayed on the market for 17 days in September.

Also, you can see above that sales to investors increased 1% year over year. I know a lot of people in America believe that the housing market is booming because of investor buying. This is so cute. That’s 13% of that ratio. Primary resident mortgage buyers always drive housing; when they fade, the housing will also fade. that is why rising mortgage rates are more important than sales to investors.

Many of the people who defend the investor theme are mostly far-right economic thinkers who believe the world is a nightmare because of the Federal Reserve. In addition, much of the far left thinks housing is going nowhere because millennials cannot buy homes because of student loan debt, even though they represent the largest percentage of home buyers in America.

Those who know me well know that I insist that the far left and right have been mourning America since 1790, and our country has smoked them all since 1790. These people cannot and will not change, so they will be. always ice skating uphill to the afterlife. Business cycles come and go; both of these groups went to extreme levels after 2008 and just don’t have the financial training to keep up with economic data without showing their bias. It’s like that.

An additional point to note in NAR’s existing sales report was this sentence: “However, sales are down 2.3% from a year ago (6.44 million as of September 2020)” N ‘ keep in mind that housing data will be negative year over year due to the high -19 comps created with soaring makeup demand last year. I think some of that spilled over into 2021, so I don’t think we’ll have any reasonable rosters until March 2022. So don’t read too much into the negative impression year over year.

On the bad news, inventory is starting to do its regular seasonal fall and winter fading. I wish inventory levels hit 1.52 million and still hope that will happen next year. For now, I can hope the total inventory fading isn’t too bad for the rest of 2021.

Overall this is a better than expected report showing a better than expected sales trend. Since this is above the trend of my sales level after data moderation has already taken place, I will always consider any number above 6.2 million existing home sales to be a beat. As long as people know we don’t have a home sales credit boom, then much of the data in 2020 and 2021 will make sense.

As you can see below, we just flexed our demographic muscle a bit more this year and we finally passed the 300 level of the MBA Index, which in my opinion could not have happened between 2008 and 2019. As you can see below, this market is not like the demand boom we experienced from 2002 to 2005. That’s why I like the idea of ​​a demand for replacement buyers demographic rather than a boom.

I know the 10-year rate has increased recently; my 10-year peak return forecast is 1.94%, so we still have a way to test my crucial level. When mortgage rates hit 3.75% and above, the housing discussion should change. However, that was not beyond the 2021 forecast, as the highest range of rate levels I had was only 3.375% -3.625%