U.S. existing home sales fall sequentially in March, sales likely to rise in medium-term

U.S. existing home sales dropped in March after rising sharply in the prior month. Sequentially, existing home sales fell 4.9 percent to 5.21 million units. The outturn was a bit weaker than the consensus forecast, which called for a fall of just 3.8 percent. The fall was concentrated in the single-family market segment, whereas sales dropped 270k on the month. The smaller condo/co-op segment did not fare any better, with sales falling 30k from February.

Home re-sales dropped across all regions, led by a 7.9 percent fall in the Midwest, followed by pullbacks of 6 percent in the West, 3.4 percent in the South and 2.9 percent in the Northeast. The number of homes available for sale rose to a seasonally unadjusted 1.68 million units from 1.63 million in February, which is up 2.4 percent from a year ago. At the current sales rate, this puts supply at 3.9 months, rising from 3.6 in the prior month and March 2018.

Median existing home prices rose 3.8 percent year-on-year, a touch below the 3.9 percent outturn in the prior month. The fall in March brings existing home sales back to November 2018 levels, with a lot of volatility, but slightly overall progress evident over the past few months, said TD Economics in a research report. Housing demand is likely to rebound in the coming months.

“While sales are likely to move higher, inventories will provide an important dampening factor over the medium term. Indeed, it's important to differentiate between the near-term and medium-term narrative. Inventories have been improving over the last few months, auguring for a solid spring buying season. But, they are still quite low compared to historical standards, and new construction has thus far been relatively limited. This will put a cap on sales activity over the medium term”, added TD Economics.

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