The Housing-Activity Bust Might Have Just Ended By Brett Eversole
Times are still tough for U.S. homebuyers... Long-term interest rates are rising again. That has pushed mortgage rates back above 7%... And it's keeping housing affordability near the lowest level in decades. Yet home prices keep rising with no end in sight. You'd think this combination should be freezing housing activity. But it isn't... In fact, existing-home sales are rising again for the first time since 2021. That's the first sign that the housing-activity bust might be over. And as we'll see, that's a good sign for the housing market and the overall economy.
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Let me explain... You might think the housing market is holding up well as long as prices are rising. But to know whether housing is healthy, we need to look at the underbelly of the market. Specifically, we want to see how many homes are selling... and how easy it is for folks to buy and sell as needed. These are the factors that make up "housing activity." And the best way to gauge housing activity is existing-home sales. This part of the market makes up more than 80% of all home sales in the U.S. So when existing-home sales are growing, we can tell that the housing market is in a healthy place. That hasn't been the case in recent years. Existing-home sales collapsed in 2021 and 2022. But we've begun seeing year-over-year ("YOY") growth for the first time since then. Take a look... Existing-home sales turned positive in October 2024. And in the latest numbers – from November – they grew by 6.1% versus the prior year. That's the highest reading since the middle of 2021. This is a good sign for the housing market. It means that despite all the bad news – high mortgage rates and low affordability – folks are still out there buying homes. And they're buying more of them than in 2023. That tells me folks are finally accepting the new reality of the housing market... The fact is, we're not going to see 3% mortgage rates again anytime soon. That idea has been a tough pill to swallow in recent years... But now, it's becoming clear to more and more potential buyers. Folks wanted to sit it out until rates fell. Now, they've started to accept that this is the new status quo. They aren't waiting around for lower rates... They're acting. This is a big win for the housing market and the U.S. as a whole. Housing activity is a major driver of our economy. And the freeze we saw in recent years slowed everything down. We might not be back to normal yet. But it looks like the trend is reversing. That should lead to economic growth... which is a win for both housing and the stock market. We'll continue to watch housing activity in the months ahead. But this change is a good reason to stay bullish on housing and the economy. Good investing, Brett Eversole Further Reading "Financial markets by definition are always forward-looking," Andrew McGuirk writes. The Federal Reserve has cut its federal-funds rate – but mortgage rates have surprisingly climbed as a result. Still, it's a better market for homebuyers than a year ago... Learn more here. "There are opportunities everywhere," Brett says. Despite recent volatility, we're still in the middle of a powerful uptrend. And there's a lot to be excited about in 2025... Read more here. |
Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK American Express (AXP)... financial giant
Bank of New York Mellon (BK)... financial services
Barclays (BCS)... financial services
Citigroup (C)... financial giant
Deutsche Bank (DB)... financial services
Discover Financial Services (DFS)... digital bank
Goldman Sachs (GS)... financial giant
Morgan Stanley (MS)... financial giant
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Whirlpool (WHR)... appliances
Williams-Sonoma (WSM)... cookware and décor
3M (MMM)... manufacturing
Cheniere Energy (LNG)... natural gas
Kinder Morgan (KMI)... oil and gas NEW LOWS OF NOTE LAST WEEK Novo Nordisk (NVO)... pharmaceuticals
Boston Beer (SAM)... beer
Wendy's (WEN)... fast food
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