Has Housing "Bottomed"?

There are Two Bottoms for Residential Real Estate

I’ve heard some positive comments from a number of real estate agents in the last week about the existing home market. And this morning the National Association of Realtors® (NAR) reported that pending home sales increased in December:

The Pending Home Sales Index (PHSI) — a forward-looking indicator of home sales based on contract signings — improved 2.5% to 76.9 in December. Year-over-year, pending transactions dropped by 33.8%. An index of 100 is equal to the level of contract activity in 2001.

“This recent low point in home sales activity is likely over,” said NAR Chief Economist Lawrence Yun. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”

Taylor Marr, Deputy Chief Economist at Redfin wrote this week: The Housing Market Has Started To Recover

The housing market has begun to recover after hitting a low point in the second week of November. We’re not out of the woods yet, but homebuyers are coming off the sidelines: The number of Redfin customers requesting first tours has improved 17 percentage points from the November trough, and the number of people contacting Redfin agents to start the homebuying process has improved 13 points. Compared with a year ago, home tours and requests for service are down 23% and 27% respectively, but that’s an improvement from the November trough, when both were down 40%.

Activity is still down sharply year-over-year (YoY), but the YoY decline is getting smaller.

And some upbeat comments on new home sales, first from Zonda Chief Economist Ali Wolf:

Ali Wolf @AliWolfEcon

It’s too soon to say (and still economic risks), but after seeing higher traffic in TX and FL and builder reported increases in CA, I wonder if some consumers have worked through the 5 stages of grief of higher mortgage rates

And from John Burns Real Estate Consulting Director of Research, Rick Palacios, Jr.:

Rick Palacios Jr. @RickPalaciosJr

Rate relief providing a welcome start for housing in 2023. Between falling mortgage rates and recent home price declines, mortgage payments have dropped double-digits. Chart to follow...

And CNBC’s Carl Quintanilla reported on the largest US homebuilder:

Carl Quintanilla @carlquintanilla

* D R HORTON INC EXEC EXPECTS SIGNIFICANTLY HIGHER LEVELS OF NET SALES ORDERS IN THE SECOND QUARTER AS COMPARED TO THE FIRST QUARTER -- CONF CALL @Reuters $DHI

There are Two Bottoms for Residential Real Estate

Way back in 2009, I pointed out that there are usually two bottoms for housing.

There will probably be two bottoms for Residential Real Estate.

The first will be for new home sales, housing starts and residential investment. The second bottom will be for prices. Sometimes these bottoms can happen years apart.

The first bottom is for activity, and the second is for prices.