Sales of existing homes in the US fell below market expectations in March following solid performance the month before, pointing to ongoing weakness in the housing market. Sales dropped -4.9% vs -3.8% expected.
Key Takeaways
- US existing home sales came to 5.21 million units in March, down -4.9% from February with a more modest drop of -3.8% expected.
- The median sales price rose 3.8% from the year before, currently at $259,400.
- Sales have now decreased for four out of the last five months despite market conditions improving in many ways.
It’s possible that the housing market simply needs more time to stabilize after a weak 2018 saw months of disappointing activity. February 2019 saw an uptick that some analysts hoped would spell a trend reversal, with lower mortgage interest rates and strong wage gains in a healthy labor market improving affordability.
While land and lot shortages as well as the heightened cost of labor have all impacted progress in homebuilding, the headwinds holding back existing home sales are more difficult to pinpoint. Sales fell to a three-year low in January, fueling ongoing concerns about the health of the market.
Monday’s negative figures are compounded by a report on Friday showing weak activity in housing starts which fell to the lowest pace since May 2017, although sentiment and mortgage applications have increased significantly, possibly indicating an uptick on the way.
Purchases of used homes fell in all four US regions, led by the Midwest with a 7.9% drop. At the pace of sales seen in March, it would take 3.9 months to clear the current inventory vs 3.6 months in February. Below 5 months, this constitutes a tight market according to realtors. Existing home sales account for 90% of the US housing market.
1/2 BMO: US existing #home sales fell more than expected
in March, though the 4.9% decline retraced only a fraction of the prior 11.2% spike and still marked the first quarterly advance in over a year. (continued)#housing #usecon pic.twitter.com/x6ZUpFa6BJ— Cambridge (@Cambridge_FX) April 22, 2019
Expert Outlook
Jessica Lautz, NAR’s vice president of demographics and behavioral insights, said “There’s a supply-demand mismatch. More inventory is needed at the lower end and a price reduction may be needed at the upper end,” she said, adding that NAR projects sales to accelerate later this year.”
“It is not surprising to see a retreat after a powerful surge in sales in the prior month,” said Lawrence Yun, NAR’s chief economist. “Still, current sales activity is underperforming in relation to the strength in the jobs markets. The impact of lower mortgage rates has not yet been fully realized.”
“Further increases in inventory are highly desirable to keep home prices in check,” Yun said. “The sustained steady gains in home sales can occur when home price appreciation grows at roughly the same pace as wage growth.”
Economists from Bloomberg predicted that the housing market is still due a positive turnaround for 2019, citing dovish Fed monetary policy and decelerating price growth compared to wage gains.
Market Reaction
Gold traded down slightly following the news, but is currently up 0.24% at $1,274.91/oz with a high of $1,275.88/oz and a low of $1,274.68/oz. Venezuela continued a trend of ongoing asset liquidation with a dramatic $400 million gold dump recently, possibly creating selling pressure earlier in the day. Analysts like Frank Holmes, CEO of Global Investors, voiced the opinion that the liquidation and following price correction creates a buying opportunity for gold investors.