by Bill McBride on 12/22/2015 11:55:00 AM
Tuesday, December 22, 2015
First, the decline in existing home sales was not a surprise, see: Existing Home Sales: Take the Under Tomorrow
Second, a key reason for the decline was the new TILA-RESPA Integrated Disclosure (TRID). In early October, this new disclosure rule pushed down mortgage applications sharply - however applications have since bounced back. Note: TILA: Truth in Lending Act, and RESPA: the Real Estate Settlement Procedures Act of 1974. The impact from TRID will sort out over a few months.
Third, there are probably some economic reasons too for the decline (not just a change in disclosures). Low inventory is probably holding down sales in many areas, and weakness in some oil producing areas (see: Houston has a problem) are also impacting sales.
Earlier: Existing Home Sales declined in November to 4.76 million SAAR
I expected some increase in inventory this year, but that hasn't happened. Inventory is still very low and falling year-over-year (down 1.9% year-over-year in November). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.
Also, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale. So some slowing for existing home sales is not be a big deal for the economy.
The following graph shows existing home sales Not Seasonally Adjusted (NSA).
Click on graph for larger image.
Sales NSA in November (red column) were the same as last year, matching the lowest for November since 2011 (NSA).