EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑

Takeaway: The crawling trend towards housing market normalization continues as 1st time buyers continue to grow while all cash and distressed shrink.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume. 


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - Compendium 112315 


Today's Focus: October Existing Home Sales 

EHS:  Predictably (HERE), EHS in October retreated -3.4% month-over-month, almost fully re-coupling with the Trend in Pending Sales.   After retracing back to cycle highs in September, EHS fell to 5.36MM and decelerated to +3.9% YoY – the slowest pace of growth in 9 months as we begin to traverse steadily steepening comps. 


As always – because closings are largely a lagged function of contract signings - we're more interested in next week’s Pending Home Sales data.  PHS for October will provide an important update on the softening demand trend observed over the last two months and whether recent regulatory changes are having a measurable impact.  Notably, any first evidence of TRID related bottlenecks/impacts should be evident in the November EHS (released 12/22) as the first bolus of Post-TRID (implemented Oct 3rd) closings will occur in November.  


Inventory & Price:  Units of inventory dropped for a second month, declining -2.28% MoM in October to 2.14 mm.  With sales declining more than supply, inventory on a month-supply basis rose slightly to 4.79-months, marking the 38th consecutive month below the traditional balanced market level of 6-months.  Ongoing supply tightness in the 90% of the market that is EHS remains supportive of improving HPI trends in the nearer-term.


1st-Time Buyers:  First-time buyers rose to 31% of the market in October, up from 29% recorded last month and in October of last year.  In contrast to the headline decline (& YoY deceleration), sales to 1st-time buyers rose +3.2% MoM and accelerated +220bps sequentially to +11% year-over-year in October.  So long as the labor/income fundamentals continue to improve across the 20-40YOA demographic, rising headship rates and single-family purchase demand should continue to manifest on a moderate lag. Further, alongside the ongoing improvement in entry level buyer demand, the crawling trend towards housing market normalization continued as all cash sales declined to 24% of transactions (down from 27% last year) while distressed sales fell to the lowest level since 2008 at 6%.




EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - EHS vs PHS


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - EHS 1st time buyers


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - EHS Months Supply


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - EHS YoY   Units


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - EHS Inventory Units


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - EHS LT


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - EHS Regional YoY


EHS | Sales ↓, Inventory ↓, 1st-Time Buyers ↑ - HPI Regional YoY





About Existing Home Sales:

The National Association of Realtors’ Existing Home Sales index measures the number of closed resales of homes, townhomes, condominiums, and co-ops. Existing home sales do not take into account the sale of newly constructed homes. Existing home sales account for 85-95% of all home sales (new home sales account for the remainder). Therefore, increases in existing home sales tend to signify increasing consumer confidence in the market. Additionally, Existing Home Sales is a lagging series, as it measures the closing of homes that were pending home sales between 1 and 2 months earlier.



The NAR’s Existing Home Sales index is published between the 20th and the 22nd of each month. The index covers data from the prior month.




Joshua Steiner, CFA


Christian B. Drake

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more