Today marks the longest bull market run in history, 3,453 days and counting.  The run began on March 9, 2009, with the Dow Jones Industrial Average @ 6,516.  The Dow is trading @ 25,800, a gain of approximately 300%.  There have been several close calls, but the market has not declined by 20% or more since the bottom of March 2009.  It has been a slow and steady climb, led by corporate profits and helped along by other factors, such as an injection of massive liquidity and tax reform.  The hallmark of this bull market has been its ability to continuously climb a wall of worry, the taller the wall, the more strength the market would find to hurdle the obstacles thrown at it.  Not only has this bull run been the longest, it has also been one of the most unloved bull markets in history.  The fact that the bull run lacked “irrational exuberance” may have been a blessing in disguise.

Existing Home Sales  

Existing home sales in July slowed for the fourth month in a row according to the National Association of Realtors (NAR).  Completed sales transactions, including single-family homes, townhouses, condominiums and co-ops decreased by 0.7%, on a seasonally adjusted basis, to 5.34 million units.

Rising home prices continue to stifle demand, especially at the low end of the spectrum.  The median existing home price, for all types of houses, increased 4.5% to $269,600 year-over-year.  July’s increase was the 77^th straight month of year-over-year price increases.  NAR chief economist, Lawrence Yun, commented, “Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come onto the market”

Housing inventory at the end of July decreased 0.5% to 1.92 million homes.  Unsold inventory is at 4.3-months of supply at the current pace of sales, unchanged from a year ago.  According to Mr. Yun, “new home construction is not keeping up to meet demand.

Not only are home buyers struggling with higher prices, but rising interest rates are also contributing to weakening affordability.   The average commitment rate for a 30-year conventional fixed rate mortgage in July was 4.57%, which is 58 basis points higher than the average commitment rate for 2017.  Month-over-month mortgage rates declined 0.5%, yet existing home sales declined 0.7%, making us wonder if there is something else ailing the existing home market.       

The lack of existing home buyers may also have something to do with changing consumer preferences.  According to Toll Brothers (TOL) CEO, Douglas C. Yearley, Jr., TOL is seeing a “flight to new” homes.  Home buyers are interested in custom building their own homes.  The CEO said that the premium for new homes is the largest he has seen as more buyers are looking to buy new.     

U.S. Crude Inventories

The Energy Information Administration (EIA) reported that crude inventories fell by5.8 million barrels for the week ended August 17.  Analysts had been expecting a draw of approximately 3.4 million barrels.  Imports decreased by 1.5 million barrels, while U.S. crude production increased by 100,000 barrels.   The larger than expected draw has crude oil trading higher by $2.08, 3.16%, @ $67.93.