Existing Home Sales hit a ten-year high for the month of January.
Lost in the decade-long housing high headlines was the disconcerting decline in inventory (or housing supply) to its lowest level ever. As Hedgeye U.S. Macro analyst Christian Drake writes in today's Early Look:
"Months-supply of inventory fell to a record low 3.56-months (6-months of inventory is conventionally considered a balanced market) with months-supply falling year-over-year for 14 consecutive months and for 26 of the last 27 months.
On a unit basis, inventory fell -7.1% YoY, marking the 20th consecutive month of negative year-over-year growth. Recall, while sales data is seasonally adjusted, the supply data is not, so the YoY figures offer the cleanest read on the underlying trend.
While some of the supply issues are cyclical in nature, the lead constraints are primarily secular."
Drake lists five "secular" supply headwinds, including low rates, households that still have negative home equity, negative demographic trends, new home price premiums and the post-crisis demand for rental properties that will constrain the upside in sales.
