The markets as a whole have held up positive momentum in the face of major headwinds. Overseas, all signs are indicating a slowing global growth. Domestically, housing data is less than stellar, even with mortgage rates remaining low.
According to a report from Credit Suisse published last month, home-buying traffic fell by 14 percent in December after letting up 12 percent in November. Year-over-year, sales of existing homes fell by 10 percent in December and seven percent in December, representing the most drastic year-over-year decline since May of 2011.
Moreover, according to a report from the National Association of Realtors regarding pending homes sales, potential home-buyers signed 2.2 percent fewer contracts, and pending home sales were down 9.8 percent when compared with December of 2017.
Even with a significant drop in mortgage rates over the past two months, home sales have been unable to impress. According to Mortgage News Daily, rates on the 30-year fixed mortgage fell from over 5 percent in mid-November to 4.61 percent by December 31. Currently, rates are at around 4.75 percent, and the market seems particularly rate sensitive, according to the Mortgage Bankers Association.
On a weekly basis, mortgage applications have actually seen a rise in volume so far in 2019, but the growth is still far from impressive.
“Refinance activity had seen a small resurgence in the past few weeks, but there still remains only a small share of borrowers left to gain from rates at the current levels,” said Joel Kan, who is the Mortgage Bankers Association vice president of industry surveys and forecasts. “Despite ongoing supply and affordability constraints, the healthy job market and underlying demographic fundamentals both point to gradual purchase growth in the coming months.”
Consumer Confidence Impacting Sales
According to some experts, consumer confidence is largely to blame.
“The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December,” said Realtor Association’s chief economist, Lawrence Yun.
One thing that hasn’t impacted home sales, surprisingly, is the Government shutdown, according to Yun.
“Seventy-five percent of Realtors reported that they haven’t yet felt the impact of the government closure. However, if another government shutdown takes place, it will lead to fewer homes sold,” said the economist.
In the new year, even with a return to growth for the stock market, experts say that a continually weak housing market should be expected. The key constraints on the market seem to be a lack of starter homes in many markets, as well as low levels of new construction. As builders continue to release data over the next few weeks and the action from the Federal Reserve comes into focus, investors would be wise to keep an eye on any indicators of consumer confidence.
“Looking ahead to 2019, expect weaker existing-homes sales as the new year ushered in a government shutdown and worsening economic uncertainty,” says Cheryl Young, who is a senior economist at Trulia.