Sell with the Wind at Your Back

QI TAKEAWAY —  Home selling conditions usually track home builder sentiment, but home buying conditions have taken the reins in a post-pandemic world. The persistence of rising home prices should keep builders building as fleeting labor market strength quells any concerns that the recent slowing is a sign of what’s to come macroeconomically. Take the ride in the sector but know it won’t last.

  1. The median price of a single-family new home rose to a record $390,900 in August, an unprecedented 26% jump from April 2020; as a result of affordability challenges, UMich’s consumer home buying conditions index has held at record levels of negativity since May
  2. Since 1993, the National Association of Home Builders’ sentiment index has had a 0.92 correlation with UMich home selling conditions vs. 0.08 with buying conditions; in the last 12 months, that correlation has flipped to -0.77 and 0.81 for selling and buying conditions
  3. Historically, the MBA’s average home purchase loan size has tracked with single family building permits; loan size appears to have stalled around $400,000, while single family permits fell back in September to July 2020 levels in the face of retracting demand