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Existing Home Sales: Uptick As Buyers Feared Higher Rates

February 18, 2022
Bottom Line: Existing home sales rose in January, surprising expectations for a further decline. As seen in mortgage application data, it appears that sidelined buyers responded to the increase in mortgage rates (especially swift in January) by closing deals, fearing even higher rates in the future as news of potential Fed rate hikes spread. Overall, this confirms that housing activity will likely continue to add modestly to 1st Quarter GDP. But the outlook beyond that remains less sanguine as rates have moved higher still and mortgage application data suggests a notable slowdown in recent weeks. Still, inventories remain very thin, suggesting home price trends will remain modestly upward even amid higher mortgage rates.
Existing Home Sales ROSE by 6.7% in January to 6.50 million, compared with market expectations for an increase to 6.10 million. The prior month was revised down from 6.18 to 6.09 million.  Home re-sales are now 2.3% BELOW their year-ago level.
The Inventory of Homes Available for Sale
FELL by 2.3% to 860k and are now 16.5% BELOW  their year-ago level. Because inventories declined while sales increased, the Months Supply FELL to 1.6 months from 1.7 months.  This is BELOW the 6 month level that is considered 'normal'.
Home Prices ROSE compared to their year-ago levels. Average home prices are 9.1% ABOVE their year-ago levels while median home prices are 15.4% ABOVE their year-ago levels.
Article by Contingent Macro Advisors