Takeaway: Existing home sales volume is stalling as a dearth of supply coupled with reduced investor demand offset growing 1st time buyer activity.

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.


PHS | PAST PEAK? - Compendium 123015


Today’s Focus: November Pending Home Sales & October Case-Shiller

Pending Home Sales declined -0.9% in November against upwardly revised October estimates while accelerating +110bps sequentially to +5.1% YoY (NSA).  While year-over-year growth accelerated against modestly easier comps (a dynamic that should persist next month), total signed contract activity recorded a 6th month of retreat off the May 2015 cycle peak.   


Perhaps the obvious question is whether May did, indeed, reflect the peak in activity in the current cycle.  From a rate-of-change perspective, sales growth in the existing market is very likely past peak – growth in 2015 benefited from both easy comps and mean reversion upside as demand in 2014 was down significantly and total sales volumes still had upside back to long-term historical averages.  Both of those dynamics are now rearview. 


While construction in the New Home market continues to hold significant upside to normalized levels of activity, on an absolute basis, higher highs in sales volumes in the existing market will require further normalization in entry level demand and some measure of supply-side support.  Growth in first-time buyer demand has been growing +12.2% YTD and we’d need to see a similar pace of demand recovery continue out of that cohort (along with ~static investor demand) to drive EHS back above 6.0MM Units.


On the pricing side, the Case-Shiller HPI data for October released yesterday confirmed the multi-month acceleration trend observed across all three primary price indices (CoreLogic, FHFA, Case-Shiller).  Tight Supply and Trailing demand trends should continue to support HPI over the nearer term and serve as a modest tailwind for housing related equities.  Price-Supply-Demand dynamics in the existing market remain delicate as rising prices help to improve the position of underwater and low-equity owners (with positive flow through to supply) while further challenging affordability for marginal buyers on housing’s bottom rung.  











PHS | PAST PEAK? - PHS Index   YoY SA From Trough




PHS | PAST PEAK? - HPI 3 Series


PHS | PAST PEAK? - Case Shiller 20 City   National TTM


PHS | PAST PEAK? - Case Shiller YoY vs MoM Scatter




About Pending Home Sales:

The Pending Home Sales Index is a monthly data release from the National Association of Realtors (NAR) and is considered a leading indicator for housing activity in the US. It is a leading indicator for Existing Home Sales, not New Home Sales. A pending home sale reflects the signing of a contract, but not the closing of the transaction, which occurs 1-2 months later. The NAR uses data from the MLS and large brokers to calculate the Pending Home Sales index. An index value of 100 corresponds to the average level of activity during 2001.



The NAR Pending Home Sales index is released between the 25th and the 31st of each month and covers data from the prior month.



About Case Shiller:

The S&P/Case-Shiller Home Price Index measures the changes in value of residential real estate by tracking single-family home re-sales in 20 metropolitan areas across the US. The index uses purchase price information obtained from county assessor and recorder offices. The Case-Shiller indexes are value-weighted, meaning price trends for more expensive homes have greater influence on estimated price changes than other homes. It is vital to note that the index’s printed number is a 3-month rolling average released on a two month delay.


Frequency and Release Date:

The S&P/Case-Shiller HPI is released on the last Tuesday of every month. The index is on a two month lag and therefore does not reflect the most recent month’s home prices.



Joshua Steiner, CFA


Christian B. Drake

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

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more