U.S Existing Home Sales Tumble: A Blip Or an Omen?
There’s been plenty of focus on the U.S housing market, with the upward trend in U.S mortgage rates through the first 10-months of last year and the FED’s 4 rate hikes through the year raising questions over the state of the U.S housing market.
Economic data out of the U.S on Tuesday was limited to December’s existing home sales figures and, while the issue of inventories continues to pin back sales numbers, a 6.4% slide in existing home sales in December was certainly more alarming than the markets had anticipated. Forecasts were for a more modest 1.3% decline and, while November’s numbers were revised up to 2.1%, it was a bad end to the year.
Unsurprisingly, the Dollar lost ground upon release of the figures, easing back from $1.13546 to $1.13622 against the EUR. Things could have been much worse if it were not for recent numbers released by the Mortgage Bankers Association. According to their latest figures, released last week, mortgage loan application volume jumped by 13.5% in the week ending 11th January, the gains coming off the back of a 23.5% surge the previous week.
The start of the year numbers were in stark contrast December and the last 2-weeks in particular, where mortgage applications had fallen by 9.8%.
While mortgage rates have been on the slide since peaking in mid-November, existing home sales hit their lowest level in 3-years in December and this comes in spite of the median price for existing home sales being on a downward trend through the year to see its lowest year-on-year percent change in over a year.
Sliding home sales, amidst a falling mortgage rate and slowing price growth environment, is an unexpected combination when considering labour market conditions. The economy may have been on a tear through 2018, but with some weak indicators beginning to creep in, suggesting a possible slowdown in growth, the housing numbers may well be a precursor to what lies ahead.
Sales were down 10.3% year-on-year in December and down by 3.1% through 2018 to the lowest level since 2015 according to figures released by the National Association of Realtors.
If the MBA’s mortgage application numbers are anything to go by, the markets will be expecting a rebound in January. When considering the fact that existing home sales account for almost 90% of home sales in the U.S, the slowdown in house price gains and fall in mortgage rates should support a bounce back.
Whether sales will continue to recover beyond January remains to be seen, however, with much depending upon sentiment towards the economy and whether the U.S equity markets can hold onto current levels and avoid a meltdown.