Lawrence Yun Blames Mortgage Rates, Predicts 2019 "Housing Revival"

NAR Chief Economist Lawrence Yun predicts a housing revival this Spring.

Commenting on the Renewed Plunge in Existing Home Sales, NAR economist Lawrence Yun Blames Mortgage Rates.

"The housing market is obviously very sensitive to mortgage rates. Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring".

Existing Home Sales 1970-Present

(Click on image to enlarge)

Existing home sales are about where they were in 1998 when mortgage rates were generally in the 6.5% to 7.5%. Today, 30-year fixed rates are under 4%.

Population-adjusted, these sales numbers are a disaster. Clearly, mortgage rates are not the overriding factor.

Mortgage Rates Shifted 2-3 Months Forward vs Existing Home Sales

(Click on image to enlarge)

Existing home sales are recorded at signing. The purchase offer is typically 1-2 prior.

Yun blames December weakness on "contract signing activity in previous months when mortgage rates were higher than today."

In the above chart, I shifted mortgage rates forward approximately 2-3 months forward so the sales more accurately reflect the interest rates at signing.

There are some long-term trends that hold, but there is no magnitude or scale.

2013 vs 2016

A decent spike in mortgage rates in 2013 correlates with a decent drop in sales. A similar spike in 2016 did nothing.

Mortgage Rates a Small Factor

Mortgage rates are a factor, but clearly not the most important one. Affordability, jobs, sentiment towards buying a home count more than mortgage rates.

If that were not the case, we would not be at the 1998 sales level with allegedly millions more people wanting a home.

Wage Growth

Wage growth has been anemic. Home prices have risen far more than wage growth. That's what matters the most.

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