The National Association of Realtors estimated that pending homes sales declined 1.6% in August from July. In July, pending sales slipped 1.4% from June. That makes three consecutive months of slightly lower home sale contracts, mirroring the time frame, as expected, of interest rate behavior.
The level of actual new home sales rebounded a bit in August, but the pace has certainly fallen from what we saw in the eighteen months or so before.
On a Y/Y basis, new home sales are still gaining but at a rate consistent only with 2011.
While the pace of sales slows (perhaps even further in the coming months if pending sales is an accurate predictor), it would suggest a further slowing for construction activity. That would frustrate expectations for the housing contribution to GDP.
More worrisome is the trend in prices. If the Census Bureau estimates (factoring in volatility) are close, we have now seen four consecutive months of price declines.
The consistency across these three data points suggests that a more durable paradigm shift or inflection in housing may be already in process. The pricing data, however, has to be the most concerning since it will impact economic behavior beyond just real estate construction.
It remains to be seen if the non-taper decision will have an impact on the growing real estate reversal. So far, rates have come down only slightly, which could mean that financial markets are still not quite committed to the idea that the Fed is back on the “unlimited” side.
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