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Existing Home Sales: Trending Lower, Mortgage Apps Suggesting More Slowdown

August 22, 2018

Bottom Line: Existing home sales fell again in July, missing expectations for a modest rebound. Home re-sales have averaged 5.38 million over the past 3 months and 5.45 million over the past 6 months, suggesting that the housing market is slowing modestly. Inventories of homes available for sale dropped modestly; but the trend in months’ supply still rose slightly. On a year-over-year basis, prices are still modestly higher, supporting the notion that affordability with higher mortgage rates is an issue for the average mortgage borrower.

Separately mortgage purchase applications rose just slightly last week but are trending sharply lower over the last one and three months as the 30-year mortgage rate continued to hold over 4.75%. Refinancing remains near record lows as purchase applications dictate the trend, turning it firmly lower since the March.

Existing Home Sales FELL by 0.7% in July to 5.34 million, compared with market expectations for an increase to 5.40 million. There were no revisions to prior data. Home re-sales are now 1.5% BELOW their year ago level and are 26.3% BELOW their September 2005 record high.

The Inventory of Homes Available for Sale FELL by 0.5% to 1,920k and are now UNCHANGED from their year ago level.

Because inventories declined while sales declined, the Months Supply ROSE to 4.3 months from 4.3 months. This is still well BELOW its July 2010 cyclical peak of 12.4 (which was its highest level since 1982) and even BELOW the 6 month level that is considered 'normal'.

The MBA Mortgage Applications Index ROSE by 4.2% during the week ended August 17 to 349.9, modestly below its 13 week average of 360.4 and 16.1% BELOW its year ago level.

The Purchase Index ROSE by 2.9% to 232.1, modestly below its 13 week average of 244.4 but 0.7% ABOVE its year ago level.

The Refinance Index ROSE by 6.0% to 983. Despite this increase, refinancing activity is slightly above its 13 week average of 982 but 32.7% BELOW its year ago level.

Contract Mortgage Rates were MIXED with the 30-year fixed rate unchanged at 4.81% and with the 15-year fixed rate declining by 2 bps to 4.25%.

Article by Contingent Macro Advisors