Houses Spending No Time on The Market

In light of recent observations in the existing home sales market, it is evident that the days on market have reached alarming levels, reminiscent of the teenage years. This signifies a return to an unequivocally unhealthy housing market, prompting concerns about its sustainability.

When the days on market dip below 30 days, it serves as a cautionary signal. However, when we witness levels akin to those experienced during adolescence or even lower, it triggers a red alert. Such a scenario suggests the existence of either an impending credit boom leading to a subsequent bust or an imbalance of supply and demand, leaving numerous potential homebuyers in fierce competition. These circumstances create what we refer to as a savagely unhealthy housing market.

The combination of low housing inventory levels and surging home prices during 2020-2023 led to an imbalanced market and raised concerns about the sustainability of such growth.

Potential Risks: Rapid and substantial home price gains are not without consequences, particularly when accompanied by rising mortgage rates. The result is often a significant decline in demand, ultimately leading to demand destruction. Although existing home sales have experienced a decline, reaching 21st-century lows, the days on market data reveals that the market remains at the teenager level.

Despite an overall better-than-expected performance in home sales, it is crucial to maintain a cautious approach in navigating the market. The projected sales range for the remainder of the year falls between 4 million and 4.6 million. Falling below 4 million would indicate a notable weakening of demand, while surpassing 4.6 million would suggest a healthier mortgage demand. Considering the current data, it is unlikely that we will surpass 4.6 million sales unless mortgage rates decrease significantly. Furthermore, there is a possibility of falling below 4 million if mortgage rates remain high and new listing data follows its seasonal decline.

Analyzing the National Association of Realtors' (NAR) data reveals that the days on the market are approaching 2022 levels, not due to an upsurge in demand but rather due to demand stabilization. This stabilization, combined with low mortgage rates and a reluctance among homeowners to sell, contributes to shorter days on the market. The percentage of cash buyers remains consistent year over year, highlighting the overall similarity to 2022 levels.

Despite a 3.8% month-to-month increase in housing inventory, year-over-year data indicates a decline. The sluggish inventory growth throughout the year has resulted in negative year-over-year prints. It is crucial to note that even with the largest drop in home sales recorded in history during 2022, total inventory data still remains far from the historically normal levels observed between 2-2.5 million units.

Although the median existing-home price for all housing types declined by 3.1% year over year, this figure should be considered in conjunction with other monthly price indexes that depict a firmer market with price increases. While median sales prices may not elicit significant concern, the overall trend of price stabilization warrants attention.

By diligently tracking inventory data and monitoring market dynamics in real time, it becomes evident that the housing market has transitioned from a crash in demand with rising inventory to a more stable state. However, the slow growth in inventory observed throughout the year and the negative year-over-year prints emphasize the challenges posed by limited housing supply. To navigate this complex market, it is crucial to remain informed, exercise caution, and consider the wider implications of market indicators.