The Existing Home Sales report for October 2023 demonstrated a MoM drop of 160,000/ 4.05%, greater than the forecasted drop of 110,000. This takes existing home sales down to their lowest level in more than 13 years. YoY resales dropped by 14.6% and housing inventories dropped by 5.7% YoY with only 1.15mn existing homes on the market, significantly less than the 2mn figure before the pandemic. With that said and abiding by the Case Shiller HPI, the medium price of homes increased by 3.4% YoY to $391,800 with about 28% of homes sold last month going above the listing price. First-time buyers accounted for 28% of sales which is unchanged from last year but below the 40% that economists and realtors say is needed for a robust housing market.
The drop in sales has been attributed to higher mortgage rates which in turn has caused fewer people to sell their homes as doing so and buying another would entail applying for a new mortgage at the current rates. This lack of supply in turn has also contributed to lower sales as with less choice on the market for homebuyers, they are less likely to buy. At the same time, less supply of housing, demonstrated by falling inventories, pushes up home prices as homes have become scarcer. I find this quite amazing as one would expect higher interest rates to push down the price of housing while in reality, they have shocked supply more than demand. This in turn has meant prices increase rather than fall. With that said, this is not a sustainable trend as once people are forced to re-mortgage on their existing home, they will likely begin to sell which in turn, will increase the supply on the market and cause prices to begin to tumble. In short- the housing market is on the edge of a cliff.
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