News & Opinions
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Comments on Existing Home Sales: Too early to see impact of higher mortgage rates, Inventory has Bottomed
Bill McBride / Calculated Risk / August 21, 2013
First, the headline sales number was no surprise (see Lawler: Early Look at Existing Home Sales in July).
Second, the strong sales rate in July is not a sign that higher mortgage rates have had no impact on sales. The NAR reports CLOSED sales, and the usual escrow period is 45 to 60 days. Mortgage rates didn’t start increasing sharply until the 2nd half of May (see Freddie Mac Weekly Primary Mortgage Market Survey®), so buyers could have locked in rates in May – and pushed to close in July. My guess is sales will be down in August reflecting higher mortgage rates.
The key number in the existing home sales report is inventory (not sales), and the NAR reported that inventory increased 5.6% in July from June, and is only down 5.0% from July 2012. This fits with the weekly data I’ve been posting.
This is the lowest level of inventory for the month of July since 2002, but this is also the smallest year-over-year decline since March 2011. The key points are: 1) inventory is very low, but 2) the year-over-year inventory decline will probably end soon. With the low level of inventory, there is still upward pressure on prices – but as inventory starts to increase, buyer urgency will wane, and price increases will slow.
When will the NAR report a year-over-year increase in inventory? Soon. Right now I’m guessing inventory will be up year-over-year in September.