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Economic & Housing Weekly Note

Existing Home Price Appreciation Hits All-Time High and New Home Sales Bounce Back

April 23, 2021

Key Takeaways:

  • The Conference Board Leading Economic Index (LEI), a gauge of the economic outlook over the next three to six months, rose 1.3 percent in March, following a slight decline in February. All ten components increased, suggesting upward economic momentum in the near term.
  • Existing home sales fell 3.7 percent in March to a seasonally adjusted annualized rate (SAAR) of 6.01 million units, according to the National Association of REALTORS® (NAR). March was the second month of significant declines, with the decline likely in part driven by February’s cold weather (existing sales are measured at the time of closing, which typically occur 30 to 45 days after signing), and average sales for Q1 2021 fell 5.3 percent compared with Q4 2020. The number of homes for sale fell 28.2 percent from last year’s levels, the second largest annual decline ever recorded, after February 2021. The months’ supply edged up from February to 2.1 months but was down from 3.3 months last March. Properties typically were under contract in 18 days, a record low. The median sales price jumped 17.2 percent on an annual basis in March, the fastest pace of price appreciation recorded in the NAR series’ 21-year history, to an all-time high of $329,100.
  • New single-family home sales rebounded sharply in March, following cold weather in February (new sales in contrast to existing sales are recorded at the time of contract) increasing 20.7 percent to a SAAR of 1.02 million, according to the Census Bureau. New home sales over the prior 3 months were revised upward by 163,000, on net. For the first quarter, new home sales rose 3.8 percent from Q4 2020. The number of new homes for sale (seasonally adjusted) was unchanged from February but worsened on a year-over-year basis for the 19th consecutive month. The month’s supply dropped by eight-tenths to 3.6 months, just one-tenth above the record lows seen in late 2020. The median sales price, unadjusted for the composition of sales, edged up 0.8 percent from a year ago.
  • Mortgage applications jumped 8.6 percent for the week ending April 16 after six consecutive weeks of declines, according to the Mortgage Bankers Association. Both purchase and refinance applications posted solid gains, rising 5.7 and 10.4 percent, respectively.
Forecast Impact:

The March drop in existing home sales was expected and modestly less than we had forecast. Although tight supply contributed to the muted existing sales number (a trend that we project will continue over the next year), the magnitude of March’s decline was likely due to February’s unusually cold weather. Existing home sales are recorded at the time of closing, while new home sales are recorded at the time of contract. We therefore expect existing home sales to rebound slightly in April, following new home sales’ expected March bounce back. New home sales rose above a million annualized units in March, only the second time they have exceeded that mark since 2006. At the moment, builders seem able to pass rising input costs onto homebuyers as the supply of homes remains tight. As long as homebuilders can keep up with buyer demand, we expect new home sales to remain strong in the near term due to the limited existing supply and low mortgage rates. Freddie Mac’s 30-year fixed mortgage rate continued its downward trend this week, falling 7 basis points to 2.97 percent and declining to below 3.0 percent for the first time since late February. Unsurprisingly, given the recent pullback in mortgage rates, refinance applications snapped back from 10 weeks of declining or flat numbers; however, we still expect annual refinance originations to pull back significantly from 2020 levels.

Rebecca Meeker
Economic and Strategic Research Group
April 23, 2021

Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic and Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.