Blindsided ~ January 25, 2019

Existing home sales were approaching the end of the year on a promising note. Monthly data from the National Association of Realtors had shown sales slipping in May, June, July.... Then in October there was an unexpected rebound, not a big one, an increase of 1.4% from September, but still a welcome relief. The November report bestowed another 1.9% gain; sales seemed to be getting back on a roll. Of course, by then, year-over-year sales were down 7.0%, the lowest in 7-1/2 years.

Analysts were expecting a slight decline in December. Those sales would have reflected houses put under agreement primarily in late October and November when interest rates had peaked, but the report actual blindsided everyone--a 6.4% decline. This further widened the year-over-year deficit, of course. December finished up 10.3% behind the same month last year; 4.99 million annualized sales compared to 5.56 million.

The bad news didn't stop there. Sales were down in every region--from 1.9% in the West (and 15% year-over-year) to 11.2% in the Midwest. And despite flagging sales, the for-sale inventory still shrunk, from 1.74 million homes and a 3.7-month supply in October to 1.55 million and 3.2 months.

NAR Chief Economist Lawrence Yun told CNBC's "Nightly Business Report" that such a huge change is usually due to some big news "like an expiring tax credit or a change in consumer protection laws." This one he pinned on buyers' price concerns as well as the November rate peak. Elsewhere he also faulted the continuing lack of inventory.

Joel Kan, Associate Vice President of the Mortgage Bankers Association, had a slightly more upbeat outlook. He acknowledged the current affordability challenges but added "We do expect this to dissipate slowly, as there have been more signs of moderating home-price growth and accelerating wage growth, which should help bridge the affordability gap."

Bucking The Trend

While we have seen appreciation moderating in most recent home price reports, those from the Federal Housing Finance Agency's (FHFA's) have been remarkably stable. With the exception of September, month-over-month national price gains have held steady at 0.4% since May. That held true for this week's report for November as well. The year-over-year increase was 5.8%, up 0.1 point from October.

Regional indices are a different matter. Four of the nine census divisions posted monthly increases in the 1.0% vicinity but three were in negative territory including the Pacific division with the largest decline, 0.8%. Further, the annual price increase in November was 4.9%, only slightly more than half of the annual gain in November 2017 of 8.9%.

Finally, giving new meaning to the word "stability," the 30-year fixed-rate remains at 4.45% for the third straight week.

Key Indicators

FHFA Home Prices Nov

Up 0.4% MoM

Up 5.8% YoY


Leading Indicators Dec

Down 0.1%

[Prior up 0.2%]


Coming Indicators


Friday, January 25

New Home Sales


Tuesday, January 29

FOMC Meeting Begins

S&P Case-Shiller Price Indices

Consumer Confidence


Wednesday, January 30


Pending Home Sales


Gold (Monex)

$1,275.00/ounce down


Crude Oil (Brent)

$61.14/brl down


U.S. Dollar to...

Euro                      0.8820 up

Japanese Yen  109.7200 up

Chinese Yuan      6.7934 up

Canadian Dollar  1.3358 up

Mexican Peso    19.0850 up


6-mo T-Bill Yield    2.51%

Up 2 bps  

10-yr T-Note Yield 2.76%

Up 3 bps


11th Dist Cost of Funds, 12/31

1.060 down 19 bps


Freddie Mac 30-Year Avg Rate 1/24

4.45% unchg


MBA - Mortgage Applications

Index Week ending 1/18


Down 2.7%

[Prior week up 13.5%]

Purchase Money Loans

Down 2.0%

[Prior week up 9.0%]

Refinancing Loans

Down 5.0%

[Prior week up 19.0%]


Jobless Claims 1/19

199,000 new claims

[Prior week 212,000 rev]

4-week moving avg 215,000 down


Existing Home Sales Dec

Down 6.4% MoM

Down 10.3% YoY

4.99M units