US: Despite the weaker report, the pace of existing home sales remains exceptionally strong – Wells Fargo

Data released on Monday from the US came in below expectation. Among the reports, was the Existing Home Sales that decline 6.6% in February. Despite the weaker report, the pace of existing home sales remains exceptionally strong, argue analysts at Wells Fargo. They point out February’s 6.22 million-unit pace is 9.1% higher than last February, which marked the last data point prior to the pandemic.  

Key Quotes:  

“Existing home sales fell 6.6% in February and sales were revised slightly lower for the prior month, with more complete data showing sales at a 6.66 million-unit pace, down from a 6.69 million-unit pace. Existing home sales reflect closings and tend to lag pending home sales, or purchase contracts, by one to two months.”

“Even with a pullback in the overall sales pace, existing home sales remain exceptionally strong. February’s 6.22 million-unit pace is 9.1% above its year-ago pace, and the 6.51 million-unit pace averaged over the past three months is 15.4% above the 5.64 million homes sold in all of 2020. Sales will likely moderate further in coming months, reflecting low inventories and the impact of harsh winter weather, particularly in Texas during February.”

“The exceptionally low number of homes on the market today reflects the extraordinary crosscurrents brought about by the pandemic.”

“The 15.8% surge in home prices over the past year has raised concerns that the housing market is on the verge of another bubble. While that always remains a possibility at some point in the future, home prices appear to have been pulled higher this past year due to the imbalance of the supply and demand of existing homes rather than an increase in speculation. Demand for homes has been strongest at the upper-end of the price range, where the supply of homes is unusually tight.”