Existing Home Sales Weaken Despite Job Growth

Today’s Wall Street Journal has a story that looks at a month-to-month decline in existing home sales that came as a surprise to the experts:

Existing-home sales declined 6.1% in November from a month earlier to a seasonally adjusted annual rate of 4.93 million, the National Association of Realtors said Monday. That was the lowest level since May.

November’s sales were 2.1% higher than a year ago and followed a particularly strong October, when sales reached their highest level of the year.

NAR chief economist Lawrence Yun called last month’s decline puzzling given strong job creation, rising consumer confidence, low interest rates and near-record stock-market levels. “Factors for improving home sales are rising,” Mr. Yun said. “Today’s decline, which is a large decline, is a bit puzzling, and I think it will be a one-month aberration.”

That could be true, but if the Fed raises short term interest rates next year as expected then borrowing costs could go up. In many markets there’s also a tight supply of homes which leads to an increase in prices. Finally, many of the jobs that are being created are lower-paying. Combine all that and you what you get is a recipe for continued weakness on the home buying front, which is probably good news for the apartment industry.