(Click on image to enlarge)

Existing-home sales courtesy of the National Association of Realtors via the St. Louis Fed

The National Association of Realtors^® NAR^® reports Existing-Home Sales Decreased 2.0% in September.

Key Details

• Existing-home sales slid 2.0% in September to a seasonally adjusted annual rate of 3.96 million. Sales retreated 15.4% from one year ago.
• The median existing-home sales price grew 2.8% from one year ago to $394,300, marking the third consecutive month of year-over-year price increases. 
• The inventory of unsold existing homes climbed 2.7% from the prior month to 1.13 million at the end of September, or the equivalent of 3.4 months’ supply at the current monthly sales pace.
• The median existing-home price for all housing types in September was $394,300, an increase of 2.8% from September 2022 ($383,500). All four U.S. regions posted price increases.
• “For the third straight month, home prices are up from a year ago, confirming the pressing need for more housing supply,” said NAR Chief Economist Lawrence Yun. 
• First-time buyers were responsible for 27% of sales in September, down from 29% in August 2023 and September 2022. NAR’s 2022 Profile of Home Buyers and Sellers – released in November 2022 – found that the annual share of first-time buyers was 26%, the lowest since NAR began tracking the data.

Existing Home Sales Seasonally Adjusted

(Click on image to enlarge)

Existing home sales are down 37.5 percent in less than two years.

Home sales were 6.34 million in January of 2022 at a seasonally adjusted annualized rate. They are now 3.96 million.

This is a transaction crash.

Existing-Home Sales Month’s Supply

(Click on image to enlarge)

Supply of homes just exceeded the November of 2022 high, up or steady for 7 consecutive months. Yet, median price keeps rising.

Existing Home Sales Since 1969

Existing-Home Sales courtesy of Trading Economics

Yes, This is a Crash

• Existing-home sales are down 37.5 percent in less than two years.
• Existing home sales are back to a level seen in the mid 1970s.
• This is a transaction crash, not a price crash.

Prices have not crashed but transactions have. Crashes are rare, but we are in one now.

People who want to move are effectively trapped in their houses because they do not want to trade a sub-3% mortgage for a 8.0% mortgage.

This crash is likely to last longer because intertest rates are likely to stay higher for longer because the Fed fears stoking more inflation.

Home sales mean appliance sales, new furniture, cabinets, new carpet, landscaping, etc. Who doesn’t spend a lot more money when they move into a new home?

Yet, from a price perspective, the bubble is still expanding.

The Housing Bubble Is Expanding Again

(Click on image to enlarge)

Case-Shiller national home prices vs CPI, Rent, and Average Hourly Earnings.

As with the previous chart, for 12 years, home prices, rent, the overall CPI and hourly earnings all rose together. That changed in 2000 with another trendline touch in 2012.

How Much Are Homes Overpriced?

If the 12-year trend of home prices rising with average hourly earnings stayed intact, the home price index would be 211, not 308.

From that we can calculate home prices are ((308-211) / 211) percent too high, roughly 46 percent too high. If you prefer, home prices would need to fall ((308-211) / 308), roughly 31 percent.

Alternatively, if home prices stagnate for years, wages may eventually catch up.

How the Fed Destroyed the Housing Market and Created Inflation in Pictures

For discussion of this dual-track housing bubble with rising prices despite a transaction crash, please see How the Fed Destroyed the Housing Market and Created Inflation in Pictures

More By This Author: