Not Lovin’ It: Housing Edition
Let’s take a trip down memory lane. What were you doing 12 years ago? Whether you were scrolling through MySpace, bumpin’ Party Rock Anthem by LMFAO, or, like me, getting potty trained, you sure weren’t buying an existing home in the United States.
And you weren’t last month either, were you? We didn’t think so.
January 2023 saw the lowest rate of existing home sales in 12 years. If you were one of the few unlucky enough to be in on that annualized 4.0mn existing homes sold last month, then congrats on the high rate and higher stress. We wish you the best of luck. For those not involved in that cohort, let’s point and laugh for a moment.
Sales of existing homes across the United States continued their precipitous drop last month, falling by 0.7% last month and officially reaching the lowest level since October 2010. It’s almost like the housing market was going through a bit of a struggle back in 2010 or something.
Oh, that’s right, that was the revival of the once-thought-for-dead US residential real estate market. Now, we’re not in nearly as dire a position today as we were then (yet), but slowing existing home sales, especially to this degree, should be a mild cause for concern.
Housing and housing service-related expenses are not only nearly 1/5th of US’s GDP, but for the average American, their home is the single most important part of their financial lives.
The velocity of exchange in that market provides things like price stability and ease of tapping home equity that tend to dry up during times of large-scale housing market uncertainty. Alone, slowing home sales aren’t worth losing sleep over, but the economic circumstances this trend is symptomatic of certainly can be.
But lowkey, that’s kinda exactly what JPow wants to see. Loyal Peelers already know that home prices blew up more than cordyceps in The Last of Us since the pandemic began, so a decline here isn’t gonna dare JPow to spike rates more than otherwise planned.
That’s because the velocity of exchange serves as a reliable proxy for demand. As this demand weakens in the face of hella-elevated interest rates, there’s only one direction for prices to go. Maybe even to a level that the average person can actually afford!
Crazy, I know, but it’s obvi not all sunshine and rainbows. Home resales, the single largest slice of the home-exchange market in the US, collapsed nearly 40% YoY. Moreover, as home sales fall amid a dry-up in demand, that’s only more reason for homebuilders to underinvest in building out housing supply across the US. Not exactly ideal for those of you looking to buy a home. Ever.
Still, confidence amid homebuilders managed to rise (somehow) while the median price of these homes (somehow) still increased by 1.5%. But, like we always say, as long as it’s making cents, it don’t have to make sense.
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