The Real Estate Market Is Slowing Down Faster Than The Market Anticipates --- Sellers Beware, Buyers Rejoice! | (12.28.22)
"The best way to predict your future is to create it." - Abraham Lincoln
What You Need To Know Today:
• The National Association of Realtors (“NAR”) released the latest month-over-month (“MoM”) pending home sales figures, which measure the (%) change in the number of homes under contract to be sold but have not yet closed (excluding new construction). According to the NAR, MoM pending home sales declined by (-4.0%) —coming in considerably below the pre-report market forecast of (-0.9%).1 This figure follows last month’s reading of (-4.6%) and marks a two-month stretch that was much worse than the market anticipated. On a year-over-year basis, pending home sales are down (-37.8%). While this data is reported following the existing home sales report (last week), it is the more forward-looking dataset as captures home sales that will occur over the next several weeks.
TL;DR — We are officially experiencing a major slowdown in home sales. Market winter is here.
• Mortgage rates moved higher over the past two days leaving many market participants frustrated as they believe there is not a clear reason and the move does not indicate a rational relationship with bonds (mortgage-backed securities). Since Monday of this week, the average 30-year fixed-rate mortgage in the U.S. has increased from ~6.25% to the context of ~6.50%.2 While this move might not seem notable in the larger context of 2022, it is significant considering the lack of provocation from other parts of the market…
TL;DR — Upward movement in mortgage rates to start this week without clear provocation from the usual market triggers.
Chart Of The Day:
The average American spent just over $60,000 in 2021, with spending habits varying significantly depending on age. According to data from the U.S. Bureau of Labor Statistics, Gen X (those born 1965-1980) spent the most with an average annual expenditure of $83,357. Millennials followed in the second spot with an average annual expenditure of $69,061. Housing, healthcare, and personal insurance/pensions were the top three spending categories for Gen X and Millennials. Meanwhile, Gen Z mirrored the first two but currently spends more on food than insurance/pensions —this is expected to as they get older and further into their careers. Interestingly, the most consistent spending category across all generations was entertainment — which I found to be surprising as I would have expected the younger generations to lead the way on that one. Further, healthcare spending had the most variance with the Silent Generation (those born in 1945 or earlier) spending the most and Gen Z spending the least. This one was not surprising as most people tend to not run into major health issues until later in life.
How Americans Spend Their Money By Age Group (2021)3
TL;DR — Despite our differences, we all apparently spend approximately the same percentage of our income on entertainment.
Source: National Association of Realtors (“NAR”) — Pending Home Sales Report.
Source: Mortgage News Daily.
Source: Visual Capitalist — “How Do Americans Spend Their Money, By Generation?”.