This week, the National Association of Realtors reported the most significant month-to-month increase in existing home sales ever recorded.
While this has to be taken in the context of the COVID-19-induced depression, the housing market has been in for the last month, the increase confirms that V-shaped recovery in housing is legit.
Further to that, it is my opinion that sales still have legs to move higher.
According to NAR, total existing-home sales completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 20.7% from May to a seasonally-adjusted annual rate of 4.72 million in June. Sales overall, however, dipped year-over-year, down 11.3% from a year ago (5.32 million in June 2019).
Existing home sales are still down year over year by 11.3%, but as crazy as this might sound, we have a shot at getting positive year-over-year growth.
If the double-digit year-over-year growth in purchase application data continues, we may see an existing home sales print of 5,510,000 in 2020.
Remember, our best monthly sales prints in the last 12 years have come in winter, not the heat months of spring or summer.
This week’s Mortgage Banking Association purchase application data showed 19% year-over-year growth.
This continues the upward trend of the last four weeks, which had year-over-year growth of +19% +16% +33% +15%. Purchase application data has had a quintessential V-shaped recovery. If purchase applications stay flat to positive, year over year, we will maintain the recovery gains.
In February, we had a yearly high of 5,760,000 existing home sales, so we should have existing home sales over 5 million soon, and even get one home sales print to 5,510,000 if this high double-digit year-over-year growth continues.
I caution people that these high levels of growth can’t be sustained, but for now, it’s still here. What a year this has been!
Purchase application data had nine weeks of negative year-over-year data due to COVID-19, but now we have had nine weeks of positive year-over-year data, all being double-digit growth. When we see these levels of growth in application data it looks good for sales 30-90 days out.
Seasonality has kicked with this data line in terms of volumes but we still want to see flat to positive year over year trends.
The NAR report showed that the median sales price for homes grew at 3.5% year over year.
Earlier in the year, we had 7% to 8% increases in prices year over year, which was too hot to be sustainable. I am hoping that real home prices go negative year over year basis to keep housing prices at a sustainable level.
My biggest fear for housing for the years 2020-2024 is that real home prices can grow over 4.6% due to the favorable housing demographics, the longer housing tenure reducing inventory, and lower mortgage rates. So far, prices have remained relatively stable, and this is bullish for housing overall. When the U.S. housing market showed negative real home price growth last year, I cheered that as being a good data line.
A few weeks ago, I wrote about some things to watch for that could reverse the strong recovery in housing, but for now, the housing V-shaped recovery stands on solid ground.