I first used the term wild unhealthy in March of 2022 because we had solid demand while inventory was at an all time low. Both the credit channel and the inventory channel changed after 2010 due to qualified mortgage laws and the 2005 bankruptcy reform laws. That means you’ll see fewer financially stressed homeowners needing to sell their homes before the job-loss downturn hits. This kind of activity was happening years before the job-loss recession of 2008.
Thank you for reading this post, don't forget to subscribe!Homeowners were in great shape before COVID-19 hit us, and they got better off after refinancing their most important loan for a lower payment. Also, their wages are increasing rapidly in times of inflation. I feared that housing inventory levels could remain abnormally low for an extended period of time, leading to unhealthy home-price growth, and that is what happened in the years 2020-2023.
Massive house price increases are not good, especially when they happen quickly. Once mortgage rates rise in this environment, it can destroy demand big time, which is what happened.
Current home sales are nearing 21st-century lows, but even with that reality, as the chart below shows, we’re still at teen levels for market days.
From NAR: Total Existing Home SalesCompleted transactions—which include single-family homes, townhomes, condominiums and co-ops—increased 0.2% from April to a seasonally-adjusted annual rate of 4.30 million in May. Year-on-year, sales fell 20.4% (down from 5.40 million in May 2022).
Home sales went better than I thought this month, as I was looking for a month-to-month decline. We had a huge sale print three months ago, which I believe will peak sales this year. So far, that call has been correct as I don’t think mortgage rates can get low enough to spur higher demand from that print.
NAR Research: Total existing home sales rose 0.2% from April to a seasonally adjusted annual rate of 4.30 million in May. 
For the rest of the year, we’re looking to play the edges of the sales range. sales must be between 4 million to 4.6 millionthe same range that I talked about after the huge sale print that took us 4,550,000. Demand is undoubtedly weakening if we turn to the downside 4 million But trending above 4.6 million would mean a substantial recovery in mortgage demand.
I don’t see anything in the data to get over 4.6 million over time, unless mortgage rates get much lower than they currently are. there’s a better case we can get down 4 million If mortgage rates remain high and new listings begin a seasonal decline in data.
by for now Wildly unhealthy part of the report.
NAR Research: First-time buyers accounted for 28% of sales in May; Individual investors bought 15% of the homes; All cash sales accounted for 25% of transactions; Distressed sales represented 2% of sales; Properties generally remained on the market for 18 days.
We are near 2022 levels for market days, not because demand is booming, but because it has stagnated. As the year progressed into the second half of 2022, housing demand worsened, and days on the market topped 30 days, meaning it was no longer a chronically unhealthy housing market.
However, as demand has stabilized, the days to market have been shortened.
Not much can be done here, mortgage rates are near 7%, and people are not selling. So when demand stabilizes, it can bring down days to market. The cash buyer percentage is similar year over year and broadly everything in this survey is not too far off from 2022 levels.
From NAR: Total housing inventory registered at the end of May stood at 1.08 million units, up 3.8% from April but down 6.1% from a year ago (1.15 million). Unsold inventory sits at 3.0 months of supply at the current sales pace, up from 2.9 months in April and 2.6 months in May 2022.
Yes, the housing inventory is getting lower year on year. While inventories increased month-over-month, this year has been a walking dead on spring inventory data, so bad has the growth been that we had a negative year-over-year print in June! I can’t stress enough how bad it is I talked about cnbc One month ago.
As you can see in the chart below, even with the biggest drop in home sales ever recorded in history in 2022, total inventory data is well below the historically normal range of between 2-2.5 million. Still far from level.
NAR total active inventory going back to 1982:
The current home sales report surprised me a bit on the demand side. However, the key takeaway for me is that the days on the market data line turned housing into an extremely unhealthy housing market. Average selling price data fell year over year, which I’d love to see, but many people don’t put too much weight on average selling prices when the monthly data comes out strong with price increases.
If there isn’t a big hue and cry about year-over-year pricing declines, it correlates strongly with prices in all of those monthly price indices that aren’t tied to average selling prices.
NAR Research: The median existing-home price for all housing types was $396,100 in May, down 3.1% from May 2022 ($408,600). Prices rose in the Northeast and Midwest but fell in the South and West. 
I publish a Housing Market Tracker every week that looks at state of the inventory data to give you an idea of what’s going on in almost real time – before the monthly sales reports arrive. This is important because the dynamics of the housing market have changed from a market that was crashing in demand as inventory rose, to a market with stable demand.
In contrast, inventory growth was so slow this year that we already see negative year-over-year prints in the NAR data. We picked up on this change on November 9th, 2022, and now that we’re in June of 2023, the data confirms what we were tracking at the time.
I looked at the housing market downturn all last year on this podcast and it’s ironic that we’re all the way back to an insanely unhealthy housing market.
