Comments on existing home sale prices

Comments on existing home sale prices

Existing home sales were reported yesterday. Since, although they are about 90% of the market, they have much less effect on the economy than new home sales, I normally don’t pay that much attention.
But I did want to emerge from my vacation hideaway to make a few comments.


1. Inventory is up 11% YoY. Inventory follows prices, and as prices rise, more and more people decide now is a good time to sell their house (especially if they are downsizing). A huge number of people held off selling during the pandemic lockdowns last year in spring. Those houses are going to come back on the market, and I expect inventory to surge as the pandemic recedes. Need help to sell you home fast? A trusted services like Cash For Houses can help you make it, as they are also are investors and problem solvers who can buy homes at the same time!


2. Prices are up 23.4% YoY, almost as insane an increase as last month’s 23.6%. Nonetheless, some are still buying properties. Online tools like the international moving cost calculator can be of great to those new homeowners.


3. Prices are even more extreme compared with income as they were at the height of the housing bubble. Using average hourly income, here’s how many hours a person would have to work to buy the median existing-home for sale last month vs. the two peaks of the bubble, August 2006 and May 2007:

6/21: 14,147 hours

8/06: 12,889

5/07: 12,585


4. But when we look at monthly mortgage payments as a multiple of average hourly income, prices aren’t nearly as extreme as they were at the peak of the bubble, because mortgage rates in June averaged 2.98%, vs. 6.52% in August 2006 and 6.26% in May 2007:

6/21: 59.5 hours

8/06: 81.6 

5/07: 77.6


So, as insane as existing home prices appear now, they could still rise substantially higher. Nevertheless, as they continue to rise, I expect sales to continue to decline (unless mortgage rates come down significantly more).