U.S. home sales fell hard in December, as in a 6.4-percent decline from November and a 10.3-percent drop from a year earlier, according to a monthly update Tuesday from the National Association of Realtors.
Big shifts like that are rare and usually associated with the rollout of a government program. There weren’t any. Big drops can also signal an economic slowdown, although the evidence is still mixed on that front.
“The latest decline is harder to explain. Perhaps it is the decline in consumer confidence that’s been occurring in the latter half of 2018,” said Lawrence Yun, chief economist for the NAR in a release. “The latest numbers do not reflect the lower, current mortgage rates compared to the November figures, so it’s really harder to explain.”
But Lou Barnes, a senior loan officer at Premier Mortgage Group in Boulder and a Fed observer, has some theories, which he shared with agents from 8Z Real Estate, a Denver-based brokerage firm, on Wednesday afternoon.
“I have a feeling that what happened in the stock market was at play,” said Barnes.
The Dow Jones industrial average dropped 8.6 percent last month, while the S&P 500 was off 9.2 percent and the Nasdaq composite dropped 9.5 percent. That extreme volatility probably caused some people to hold off.
The impact of the government shutdown on the housing market is another thing to consider, said JP Piccinini, owner of the real estate brokerage JP and Associates in Frisco, Texas.
“The public is so susceptible to news and fear. The government shutdown will impact January sales as well,” he predicted in an email.
If Barnes and Piccinini are right, then pent-up demand should hit the market when whatever was behind the caution in December goes away. Major U.S. stock indexes are up 5 percent this month, so January is looking a lot better than December.
Mortgage applications surged in the first half of January, although they leveled off again the past week, according to reports from the Mortgage Bankers Association.
And while the government shutdown continues to drag on, that too will eventually end. Piccinini forecasts a “crazy spring” as the housing market slingshots to make up for lost ground.
Related Articles
-
Millennials will take out 45 percent of all U.S. mortgages in 2019, but they face hurdles to cracking Denver’s market
-
Lakewood measure limiting home construction once again derailed by legal challenge
-
Home sales slowed across most of Colorado in 2018
-
Opendoor knocks, and Denver-area home sellers answer
-
Englewood vote means Grandpa can live out back for cheap
Barnes said he doesn’t see a recession on the immediate horizon, but when one comes, the housing market will be in much better shape than it was in 2008.
Normally, lending standards get looser the longer a recovery stretches on. But the average credit score required to qualify for a mortgage hasn’t budged during the entire recovery, which will be the longest on record if it survives to summer, Barnes said.
Mortgage delinquencies and foreclosures remain at extremely low levels, nearly a decade into the recovery, and no state is doing a better job when it comes to borrowers staying current on their loans than Colorado, Barnes said.
