The housing market is savagely unhealthy
The National Association of Realtors
The National Association of Realtors reported that existing home sales for February came in as a miss of estimates at 6.02 million. This level is still within my 2022 forecast sales range between 5.74 million and 6.16 million. Last year I discussed sales levels coming back down to 5.84 million and I am looking for more of the same in 2022, at the 5.74 million level.
The month-to-month fall of existing home sales was noticeable, but I didn’t buy the January print of 6.5 million because I thought we had some spillover demand from December, so this month’s sales look right.
NAR Research: Total existing-home sales sank 7.2% from January to a seasonally adjusted annual rate of 6.02 million in February.
Real Estate Inventory
Now inventory is about to have its seasonal push, but the key is that we want to see inventory increase year over year, not have declines year over year. At this point, I will be grateful for being just flat. However, negative year-over-year inventory is not what we want to see.
Total inventory data is deficient, and this was my biggest fear in the years 2020-2024, and it happened. Inventory has been slowly falling since 2014, so if demand picks up in 2020-2024, it can collapse to shallow levels. Currently, the total Inventory from the NAR is 870,000.
To get the housing market to be sane and normal again, we need inventory to get back in a range between 1.52 – 1.93 million; this is still historically low, but this gives the housing market a breather from the madness that we see today.
Since the end of 2020, I have tried my best to stress that home prices overheating should always be the concern in 2020-2024. You can’t have the best housing demographics ever, with the lowest mortgage rates and the best loan profiles with falling inventory for eight years, and not be concerned about this during 2020-2024.
I thought creating the term forbearance crash bros in the Summer of 2020 would help educate homebuyers. However, we still live in a society where the premise that housing will crash 40%-80% is looked at as a logical view. After 11 years of listening to people talk about housing crashing from 2012-2022, you have to ask yourself who is the bigger fool: the fool, or the fool who follows them? A significantly older man named Ben said that.
Housing Prices are Overheated
Home prices are still overheating even today because we currently have a raw shortage of homes. This is not a good thing and is why I am on team higher rates.
NAR Research: The median existing-home sales price rose to $357,300, up 15.0% from one year ago.
One of the critical data lines that I want to see improve this year is days on market. My concern now is that some sellers are feeling stressed about this market, which should never happen because this is the best seller market ever.
