Housing – Is the Bloom off the Rose?

Posted on July 24, 2018 by Gemmer Asset

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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.

 

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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.

 

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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.

 

California Sales

 

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.

 

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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.

 

 

Charles Email Sig

 

 

 

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