Monthly Report: October 2024

United States 

Once again, the housing market presents a mixed picture, with newly built home sales showing strength while existing home sales are struggling to get out of their downtrend. The US Economy is showing strength, but this is weighing on the already high mortgage rates, creating a mixed reaction for the housing market. 

According to the U.S. Census Bureau, sales of newly built homes increased by 4.1% to a 738,000 seasonally adjusted annual rate in September. This represents a 6.3% increase YoY. This is the strongest pace of growth in over one year. New single-family home inventory in September remained elevated at 470,000, up 8.0% compared to a year earlier. 

Existing home sales remained at multi-year lows in September. We are now around 40% lower than the seasonal average of the last five years and at a 14-year low.

The number of homes available has risen by 1.5% to 1.4m, constituting the ninth consecutive monthly increase. Housing inventory has been at its highest level since late 2020.

US Mortgage applications dropped by 7% week-on-week, marking the 4th consecutive drop following a 17% plunge the week before. The move has followed the rise in yields as the market expects a more hawkish FED in the upcoming meetings, following the latest economic data from the US.   

The Mortgage refinancing index has been tumbling during October after peaking towards the end of September.

The average 30-year fixed-rate mortgage jumped from 6.13% to 6.54% during October, erasing all its movement since August. The rate had declined to nearly 6% in late September from a high of almost 8% last October. This has correlated greatly with the rise in long-term Treasury yields and global bonds during October.

 It's a very similar picture for the 15-year mortgage rate.

Median sale prices for new houses have remained range-bound for most of this year, while prices for existing homes have clearly peaked locally during June and have been coming off ever since. Demand for existing homes is clearly reduced, as sales are hitting multiyear lows and inventory is building. 

On the more positive side, the National Association of Home Builders/Wells Fargo Housing Market Index increased by two points to 43 in October, hitting a 4-month high. The index for single-family sales in the present rose 2 points to 47, while the index for single-family sales in the next six months rose 4 points to 57, the highest level since April. Additionally, Retail sales (0.4% MoM vs. the 0.3% expected) and consumer spending have been performing well, exhibiting overall strength in the US economy.

Finally, the cash share of new home sales has started dipping as the FED has started easing rates. During the hiking period, the share of all-cash new home sales has increased significantly, going from 3.1% in Q4 of 2021 to 7.0% during Q2 of 2024. The chart below illustrates how correlated all cash shares have been to the Fed rate.

United Kingdom 

There were a few significant changes in the UK property market in October. The Halifax house index exceeded expectations on a Month-over-Month basis (0.3% vs. 0.2%) but undershot expectations on a year-over-year basis (4.7% vs. 5.1%), continuing the uptrend since December 2023. 

On the positive side, the most significant change was a slight reduction in the mortgage rate from 7.83% to 7.69%, which was unexpected. Mortgage approvals were higher than expected; however, actual mortgage lending was lower. We don't expect a massive change until mortgage rates substantially come down. The RICS Market Survey on house price balance measures the gap between forecasted rises and falls in house prices, jumped to +11% in September, up from 0%  and -16% in August and July. This was a clear beat from the 4% expected and the first positive reading since October 2022. 

Finally, construction output was up 0.3% year over year in August, which is better than the expected -0.3%. 

China 

The downfall continues, with the latest House price index print showing a YoY drop of 5.7%, compared to the forecasted 0.4%. The latest monetary stimulus and lowering mortgage rates were expected to support the housing market; however, it is clear that the impact on the real economy has been muted so far. This marked the 15th consecutive month of decrease and the biggest YoY drop since 2015.

WANT MORE?

We’ll make it easy for you! Upgrade to Premium and gain an edge in the markets with industry-leading insights and analysis.

References

(n.d.). US Treasuries Yield Curve. US Treasuries Yield Curve. https://www.ustreasuryyieldcurve.com/

(n.d.). CME FedWatch Tool. CME Group. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

(n.d.).Trading Economics. Trading Economics. https://tradingeconomics.com/united-states/nahb-housing-market-index

(n.d.).Goldman Sachs. Goldman Sachs. https://www.goldmansachs.com/

(n.d.).Bloomberg. Bloomberg. https://www.bloomberg.com

(n.d.). FRED. Federal Reserve Economic Data. https://fred.stlouisfed.org/

Disclaimer  

Wizard of Soho LLC and Weekly Wizdom publish financial information based on research and opinion. We are not investment advisors, and we do not provide personalized, individualized, or tailored investment advice, nor do we provide legal advice or information. The publisher does not guarantee the accuracy of the information provided on this page. All statements and expressions present are based on the author's or paid advertiser's opinion and research. Directly or indirectly, no opinion is an offer or solicitation to buy or sell the securities or financial instruments mentioned.

As news is ever-changing, the opinions included should not be taken as specific advice on the merits of any investment decision. Investors should pursue their investigation and review of publicly available information to make decisions regarding the prospects of any company discussed. Any projections, market outlooks, or estimates herein are forward-looking and inherently unreliable. They are based on assumptions and should not be construed to be indicative of actual events that will occur.

Contrarily, other events that were not considered may occur and significantly affect the returns or performance of the securities discussed herein. The information provided is based on matters as they exist on the date of preparation and do not consider future dates. As a result, the publisher undertakes no obligation to correct, update, or revise the material in this document or provide any additional information. The publisher, its affiliates, and clients may currently or foreseeably have long or short positions in the securities of the companies mentioned herein. They may, therefore, profit from fluctuations in the trading price of the securities. There is, however, no guarantee that such persons will maintain these positions. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile, or any other means is illegal and punishable.

Neither the publisher nor its affiliates accept any liability for any direct or consequential loss arising from any use of the information contained herein. By using the website or any affiliated social media account, you consent and agree to this disclaimer and our terms of use.