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Market Commentary

Existing Home Supply Remains Tight

By Charles Payne, CEO & Principal Analyst
4/23/2018 12:57 PM
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For the third day in a row, the U.S. dollar has outperformed its major foreign counterparts, but the dollar index is still below the levels from a year ago.  Rising interest rates, and the 10- year treasury hovering near 3%, is leading the dollar higher.  A strong U.S. dollar can be a headwind for U.S. multi-national companies as it makes their goods and services more expensive to overseas customers.          

Existing home sales came in near expectations. February existing home sales were 5.6 million units, slightly better than the expectation for 5.57 million units.  Sales were 3% higher than January’s 5.38 million sales and 1.1% higher than last year. 

The median existing single-family home price was $243,400, up 5.9% from a year ago.  Prices were up in all regions; Northeast +3.6% ($258,900), Midwest 4.5% (179,400), South 5.4% ($215,700), West 9.6% ($370,600). 

The inventory of homes for sale rose 4.6% in February to 1.59 million but are still 8.1% lower than a year ago.  Inventory has fallen on a year-over-year basis for 33 consecutive months and is at a 3.4-month’s supply.  Normal levels associated with a balanced market is typically at a 6-month supply. 

First-time buyers were 29% of sales in February, unchanged from the prior month and down from 31% a year ago.  Lack of supply and affordability is pressuring first time home buyers, and rising interest rates, may impede them further.

Speaking of rates, mortgage rates will be watched closely, as an increase in rates will negatively affect housing affordability if median prices remain the same.  Currently, a 30-year mortgage is @ 4.43% versus 4.10% a year ago.  Using today’s median average price of $243,400 and a 30-year mortgage rate of 4.43 would equate to a monthly payment of approximately $1223/month versus using the median price from a year ago, $229,500, and a mortgage rate of 4.10% and you come up with a monthly payment of $1,109.  This means it cost an extra $1,368 per year. 

So far today, equity markets have been hovering near the flat line.   Decliners are leading advancers 1492/1372 on the NYSE and 1486/1175 on the Nasdaq.  Consumer Discretionary, Health Care and Telecom are strong today, while Consumer Staples, Energy, Materials, Real Estate and Utilities lag.


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