Fannie Mae Economic and Strategic Research Group Review of Home Sales Data

On Friday, the Fannie Mae Economic and Strategic Research (ESR) Group released its weekly Economic and Housing Note.

Existing-home sales were a bit below the ESR Group’s expectations in September. Still, the Group had previously observed only a small pickup in mortgage applications as rates fell over the summer, so the subdued sales figure is in line with its thinking that there is a waning pool of potential homebuyers at current affordability levels.

With mortgage rates now up more than 40 basis points since the end of September, the Group doesn’t expect a significant pickup in sales by the end of the year. However, the new-home side remains a bright spot in the housing market.

Considering revisions to previous months, the new-sales figure was almost exactly in line with the ESR Group’s forecast for the quarter. Fannie Mae views the current months’ supply of new homes for sale as sort of a goldilocks zone for continuing sales transactions; it’s high enough to encourage builders to continue to use incentives to move inventories but not so high that they’re likely to meaningfully slow construction.

The Group notes that the October and November readings of both existing- and new-home sales are likely to be volatile given hurricane disruptions, and the recent move back up in mortgage rates could act as a headwind. Still, the outlook for new single-family starts and construction remains generally positive given a lack of existing inventories available for sale in many metros.