With Housing Starts and Building Permits jumping exuberantly on the heels of declining mortgage rates (and mortgage applications spiking), today's existing home sales data for August should be an interesting barometer for just how crazy The Fed's decision to slash rates by 50bps was (with home prices at record highs and rising fast).

Perhaps shocking to some, existing home sales disappointed in August, dropping 2.5% MoM (vs -1.3% MoM exp) leaving sales down 4.22% YoY.

Source: Bloomberg

There hasn't been a positive YoY sales comp since July 2021 as the existing home sales SAAR dropped to its lowest since Oct 2023 (just a smidge above the weakest since 2010)...

Source: Bloomberg

“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” NAR chief economist Lawrence Yun said in a statement.

Interestingly , mortgage applications are soaring higher on the back of tumbling mortgage rates (at their lowest since Sept 2022)...

Source: Bloomberg

Which were enabled by The Fed jawboning the new rate-cutting cycle (and now actuating its crisis-level 50bps cut).

The trouble is, home prices are already at record highs as the rate-cutting cycle begins. The median sales price, meantime, increased 3.1% in the year through August, to $416,700. That was the highest for any August in NAR data.

Source: Bloomberg

A lack of inventory had been a notable headwind, with many would-be sellers unwilling to put their homes on the market and give up their sub-3% mortgage rates. This so-called lock-in effect has reduced sales by about a million homes a year, Yun has said.

“The rise in inventory – and, more technically, the accompanying months’ supply – implies home buyers are in a much-improved  position to find the right home and at more favorable prices,” Yun added.

“However, in areas where supply remains limited, like many markets in the Northeast, sellers still appear to hold the upper hand.”

In August, NAR’s figures showed 60% of homes sold were on the market for less than a month, compared with 62% in July.

And 20% sold above the list price, compared with 24% a month earlier.

First-time buyers made up 26% of purchases, matching an all-time low.

Individual investors or second-home buyers purchased 19% of homes, compared with 16% a year ago.

Who will get the blame for lack of affordability now?

Source: Bloomberg

If Trump wins, the answer to that is easy. If Kamala wins, it is corporate greed, durr (and on a side note, prices are soaring alongside inventories... not exactly helping the case for Kamala's 'Make Housing Affordable Again' plan!)