There has been some interesting housing data over the last couple days that might point towards a marked slowdown coming, at least in certain markets.
June Existing Home Sales
Existing home sales slipped 0.6% in June from the previous month and are now down 2.2% year-over-year. This is now the third month in a row of lower sales. The decline is pretty small given the run up of the last few years, but the Wall Street Journal splashed the story on the front page above the fold. The chart from Calculated Risk below shows existing home sales on a seasonally adjusted basis. The data series is certainly volatile, and the recent numbers are lower, but not dramatically so.
The much bigger story concerns inventory levels. These increased 0.5% year-over-year in June (blue line below), and as you can see, this is a big change from the last couple years.
The months of supply remains low, but it looks like inventory levels are starting to march higher. Higher inventories will mean longer sales times and a flattening of price appreciation, particularly in over heated markets.
The California Association of Relators’ also released June’s numbers this week. Sales and prices edged higher, but trends over the last year point to slowing sales. The key piece from the press release is:
“June’s sales figure was up 0.4 percent from the revised 409,270 level in May and down 7.3 percent compared with home sales in June 2017 of 443,120. The year-over-year sales decline was the largest in nearly four years.”
And of course there are anecdotal articles such as this.
Or take a look at a Zillow map of available homes in a vacation spot like Truckee, CA. A place like this is the ultimate discretionary market as it is dominated by second homes. They are likely to see any slowdown first. This screen shot from this morning shows 427 homes for sale, the most I’ve seen in a long time.
None of this means housing is poised for another crash, only that the one-way market of the last three or four years is balancing out. Higher interest rates and rapid home price appreciation are finally starting to bite.
Published by Gemmer Asset Management LLC The material presented (including all charts, graphs and statistics) is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The material is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objective, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this material is suitable for their particular circumstances and, if appropriate, see professional advice, including tax advice. The price and value of investments referred to in this material and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or prices of, or income derive from, certain investments. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Gemmer Asset Management LLC (GAM). Any mutual fund performance presented in this material are used to illustrate opportunities within a diversified portfolio and do not represent the only mutual funds used in actual client portfolios. Any allocation models or statistics in this material are subject to change. GAM may change the funds utilized and/or the percentage weightings due to various circumstances. Please contact GAM, your advisor or financial representative for current inflation on allocation, account minimums and fees. Any major market indexes that are presented are unmanaged indexes or index-based mutual funds commonly used to measure the performance of the US and global stock/bond markets. These indexes have not necessarily been selected to represent an appropriate benchmark for the investment or model portfolio performance, but rather is disclosed to allow for comparison to that of well known, widely recognized indexes. The volatility of all indexes may be materially different from that of client portfolios. This material is presented for informational purposes. We maintain a list of all recommendations made in our allocation models for at least the previous 12 months. If you would like a complete listing of previous and current recommendations, please contact our office.