The housing market isn't healthy.
Over the past year, mortgage rates have rocketed higher and existing home sales have plummeted. To understand what's behind these ominous trends, scroll through the following six charts.
First, let's start with the most important metric of all, existing home sales. As of February, which is the latest available data, sales of previously owned homes were down 7.1% on a year-over-year basis.
Second, new home sales are also down, though not as significantly. As of February, they were off by 3.3% compared with January and 1.1% compared with February 2013.
Third, the most obvious explanation for the drop (at least in terms of previously owned homes) is that the supply (i.e., inventory) of listed properties is constrained. Equivalent to 5.2 months' worth of sales, it's well below the six-month threshold at which the market is said to be in balance.
Fourth, the dearth of supply is why home prices have soared over the past year, increasing by double-digit percentages in each of the past 11 months.
Fifth, there's also reason to believe that demand has taken a hit thanks to increasing mortgage rates. Since the end of 2012, the cost of a 30-year fixed-rate mortgage has risen by nearly 100 basis points, from around 3.3% at the trough to around 4.3% today.
Sixth, you can see the impact of this on purchase-money mortgage application volumes, which were down by 17.9% in March compared with the year-ago period.
What do these six charts mean when you put them together?
To me, they suggest that the housing market could go either way. If we're lucky, the spring selling season will cure all of this. If we're not, then it's hard to predict what we're in for.
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