As we can see below, housing moderated, found a base and increased around the second half of 2021. I emphasize this point because many people had sent me sample YouTube videos. with people touting a real estate crash in the second half of the year. I can tell you that these people do not have the training to properly read data on housing or the economy. If they did, then the idea of ââa sales slump in 2021 – when demand trend data still showed stability – is ludicrous. Remember, be the detective, not the troll.
Last week I wrote about how the existing home sales markets outperformed my maximum sales range in the last two sales reports. As long as the last two reports of the year are over 6.2 million, you should see that as a beat. Of course, total sales are above my critical level of 6.2 million when adding new home sales. So far, 2020 and 2021 has been seen as a noticeable beat in my eyes. Demographics and low mortgage rates are two very difficult competitors to contend with when advocating for an epic real estate crash.
From NAR: “Motivated by the rapid rise in rents and the anticipated rise in mortgage rates, consumers who are on a solid financial footing are signing contracts to buy a home as soon as possible,” said Lawrence Yun, chief economist by NAR. “This strong buy is a testament to the fact that demand is still relatively high, as it occurs at a time when stocks are still very low.”
Has anyone noticed that over the past eight years everyone blames low inventory when we run out of estimates, but they shut up when sales exceed estimates while inventory continues to drop? ? Over the years, I have never believed the premise that low inventory holds back sales, which is expected whenever sales weaken. 2020 and 2021 are at pre-cycle demand highs, with total inventory levels at historic lows for both years.
Remember that a seller is usually a buyer too, so inventory should drop when demand picks up and the seller finds another home to buy. When stocks increase and there is more supply in the market, it means that demand is decreasing. Total inventory levels have been declining since 2014, while sales are increasing. Keep this in mind in the future, as sales will slow down at some point when the demand for mortgages drops.
From the NAR: âThe notable gain in October ensures that total sales of existing homes in 2021 will exceed 6 million, which will be the best performance in 15 years. “
One aspect of housing that isn’t getting enough attention is that mortgage purchase application data has had a good run for 12 weeks. Earlier this year, I wrote an article saying that requisition data is going to be negative year over year in the second half of 2021, and we shouldn’t overreact because people will collapse.
This is the nature of the beast, because I have seen this behavior a lot. Lack of training and failure to make COVID-19 adjustments to the data creates a false sense of reality for those affected by housing accidents, and some were pushing negative data year over year like a legitimate premise for the sales collapse.
Well, as we can see the sales didn’t crash, something else happened. The purchase requisition data was improving because the year-over-year declines were improving so much that we have a chance to report even a flat or positive impression, which will make my head explode. Even I didn’t think this might be possible with such high offsets, as we can see below with the demand for mortgages firming up.
From July 14 to September 8, year-over-year purchase requisition data showed a roughly negative trend 18% -19%. Higher comparisons in 2020 were still going to result in negative year-over-year data this year. However, taking only the last eight weeks, always using high compositions, the average drop is about 8% -9%. Last three weeks combined are down only 4.6% on average, and this data line looks 30-90 days.
Yes, the seasonality started a while ago, but strengthening that data line is a big deal. Consider this in the context of the focus on iBuyers, which might not even account for 1% of total home sales. The focus was also on investors, as the premise was that without investors housing would collapse. This idea misses the real trends in the data that matters, as America’s biggest homebuyers are still mortgage buyers, not investors. We don’t have a housing divide on Wall Street: when mortgage demand weakens, so will housing.
Hope my work this year can give you the idea that sexy ideological headlines might get press time, but good ol ‘boring economic work gets the job done with satisfaction. Today’s pending home sales are just another statement of what we’ve seen over the past couple of years – it’s the revenge of the nerds.