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🪩 Homes Sales Fall | Prices Rise | FED Continues to Wander Aimlessly

🪩 Homes Sales Fall | Prices Rise | FED Continues to Wander Aimlessly

Michael DiLucchio
April 27, 2023

Morning! This is MF Lending - we’re the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)

Here’s what we’ve got for you:

March FHFA & Case-Shiller Housing Price Index 🔎
Pending Home Sales Report 🧮
May & June FED Expectations 🔮

By the way, this article on Date The Rate Is a Nightmare is the most clicked link in this newsletter, you should check it out if you are interested.

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March FHFA & Case-Shiller Housing Price Index 🔎

As you know, these indices track home appreciation across the country. The Case-Shiller is considered the “gold standard” and FHFA includes only homes purchased with a conventional loan.

Case-Shiller:
- MOM +.2% | YOY +2%
FHFA:
- MOM +.5% | YOY +4%
Other Stats:
- Median Home Prices +3.8% MOM
- New Home Sales +9.6% MOM (putting more pressure on inventory)

Another note - we are only down 0.2% from the all-time highs seen in 2021

So the simple question is - where is this “housing correction” that buyers continue to fear and wait for?

It is not coming.

Knowing the lunacy we are seeing across media outlets and the FED’s level of delusion with being “data dependent” here is a prediction -

The May numbers for these reports (that come out in June) will be splattered across every news outlet because they are going to show a YOY decline in appreciation. This will be marginal decreases, and by the end of 2023, the results will be that home prices rise YOY, once again. Timestamp this one.

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The media (and the FED) fail to understand that the numbers they use are trailing twelve months of data and refuse to look at the real-time housing market. There is a major lag.

The FED continues to pound its chest and say it’s “data dependent”.

The data they use is now from a market that was horribly inflated by the FED themselves.

Ironically, this is the exact same mistake they made leading up to this in 2020 (when they used inflation data from 2019) to support their plan to continue QE and not raise rates earlier.

The FED’s CPI is reporting shelter costs at 8.2% (which contributes over 40% of the CPI numbers).

But - real on-time data from Apartment List rental survey shows actual shelter costs at 2.6%.

That is a massive difference.

CPI should be much lower than what is being reported if they would just use real-time data.

Because this data trails 12 months, the FED is not using relevant data to support their continuing hike of interest rates and it is going to (if not already) run this economy into a brick wall.

Pending Home Sales Report 🧮

Here are the highlights from the Pending Home Sales Report released this morning:

Pending homes sales decreased 5.2% MOM (down 23.2% YOY) | - the largest monthly drop since Nov 2022.
The South was the only region in the US seeing an increase in pending home sales
33% of homes are receiving multiple offers and 28% of homes are selling above list price.

What do these numbers tell us?

The biggest issue facing the industry is not buyer demand, as so many in the media want us to believe. The real issue is inventory.

As I continue to tell clients and partners - buyer demand is out there. Most buyers have come to terms with the current interest rates and have accepted the monthly payments they will face.

With 28% of homes selling above list, this is the tip of the iceberg as we turn the corner into the summer months. If we see a rate pause in Jun, we may see buyers flood the market.

The question will continue to be - will there be enough sellers willing to part with their rate?

Because we cannot build out of this problem.

May & June FED Expectations 🔮

May 3rd is the upcoming FED meeting and press conference.

According to market expectations - there is an 85% chance that the FED raises interest rates 25bps.

With such a high probability of hikes going into the meeting - you can expect to see this rate increase priced into the market as early as this week (as we can see from the rate charts above).