The National Association of Realtors reported 5.99 million home sales for July, which was an excellent beat of estimates and a dagger into the hearts of the 2021 housing crash crew. Mother demographics and low mortgage rates, two things that have been transparent to human beings for a long time, are powerful economic forces. Both together make it very difficult for an epic housing crash in sales to happen, especially when the years 2008-2019 had the weakest housing recovery ever.
We were never working from an elevated level of sales in the existing home sales market as we ended 2020 with just 5,640,000, which was only 130,000 more than 2017 levels. The notion that sales would simply collapse by 2-3 million levels like what we saw from the peak of the housing bubble year at 7,260,000 to as low as a bit under 4 million is entering internet conspiracy levels. As I showed here, the market we have currently isn’t 2008 all over again.
I suggest after 10 years of being wrong on the housing crash call and now needing a 86% home price crash to just get back to 2012 levels, my best advice is to get some therapy for Housing Bubble Boy 2.0 sickness. You still have time, life is worth living free from this disease.
The sales data trend, which I have always believed is the best way to look at demand using the purchase application data as a reference, has been in line with what I talked about back in March of this year. As I wrote then, the rule of thumb I am using for 2021 is that existing home sales, if they’re doing good, should be trending between 5,840,000-6,200,000. This, to me, would be considered a good year for housing.
However, I had anticipated some existing home sales prints under 5,840,000 this year, and so far, we have only gotten one of those.
So far, 2021 looks about right. if we don’t see some prints below 5,840,000, I would consider it slightly better than my estimates. Remember that COVID-19 has created many distortions in economic data. Since the end of last year, my theme is that housing is going to moderate, but don’t over-read that moderation in the data.
We are trying to find a base to work from that is more traditional with standard housing data. We are getting there, and then we can go back to normal. I am not, nor will I ever be, a housing sales or construction boom person. However, I am a big believer in demographic replacement buyer demand. If total home sales (new + existing) are over 6.2 million each year from 2020 through 2024, I would consider that a beat. (This article is continued on Housingwire.com)
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