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Existing Home Sales: Sharp Decline As Expected

April 21, 2020

Bottom Line: After hitting a cycle high of 5.77 million annualized units in February, existing-home sales fell sharply in March as shutdowns for the novel coronavirus slowed activity. Home prices were higher, though, and while the inventory of homes rose, supply remained historically tight.

93% of realtors surveyed reported changing behavior for social distancing. First-time buyers accounted for 34% of sales in March, up from prior months. Realtors reported conducting virtual open home tours and seeing continued strong demand as mortgage rates dropped.

While there was some uncertainty, especially in late March, many local shelter-in-place orders exempted realtors as essential workers in April. Still, April will likely see the slower activity as shutdowns only hit in the second half of March. That said, housing should be one of the first areas to recover, given low mortgage rates and the tightness of the market.

Existing Home Sales FELL by 8.5% in March to 5.27 million, compared with market expectations for a decline to 5.25 million. The prior month was revised down from 5.77 to 5.76 million.

Home re-sales are now 0.8% ABOVE their year-ago level but are 27.3% BELOW their September 2005 record high.

The Inventory of Homes Available for Sale ROSE by 2.7% to 1,500k but are still 10.2% BELOW their year-ago level. Because inventories increased while sales declined, the Months Supply ROSE to 3.4 months from 3.0 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'.

Home Prices ROSE compared to their year-ago levels. Average home prices are 6.2% ABOVE their year-ago levels while median home prices are 8.0% ABOVE their year-ago levels.

Article by Contingent Macro Advisors