– by a New Deal Democrat
Sales and prices of existing homes are falling further. BUT. . .
Although sales of existing homes make up about 90% of the total market, they have a much smaller economic impact than new home construction. They are best used to confirm trends. In January, they continued to confirm that sales continued to decline, and prices trailing sales belatedly joined in.
January sales fell another -0.7% to 4.2 million y/y, down -37% y/y from a peak of 6.34 million a year ago:
The non-seasonally adjusted median existing home price also declined further to $359,000, which is only 1.3% year-over-year growth from $354,300 in 2022. Because my rule of thumb for non-seasonally adjusted data is that the trend has turned around where the year-on-year increase is less than 1/2 of its maximum increase in the last 12 months, which was +17.1% growth from 12 months ago, needless to say, this confirms that prices have decreased significantly:
The drop in sales, as well as housing permits and starts, is certainly consistent with a recession — which typically coincides with a decline of about 20% or more. As I’ve pointed out several times, what’s “different *so far* this time” is that it hasn’t led to any significant decline in the backlog of authorized housing that hasn’t yet started or housing under construction:
Until housing starts decline significantly, housing does not exert significant downward pressure on the economy.