QUICK QUILL — Multiple metrics demonstrate U.S. home sales are treading water. After an ebbing in a mini-price bulge measured by average loan sizes, homebuilding stocks face a key test of last year’s peak. Two-thirds of a ‘head and shoulders’ pattern has already been traced. With the drumbeat of layoffs showing no signs of ebbing, the right shoulder is likely being drawn.
TAKEAWAYS
- UMich Middle/Upper-Income Average Home Buying Conditions eased from 44 in December to 39 in January while Selling Conditions sidesway-ed from 127 to 126.5; both are below their 2023-24 highs and are treading water alongside existing single-family home sales
- December new home sales beat expectations but remain 5-6% below peak levels from 2023-24; additionally, their correlation with the S&P 500 Homebuilding Index is a so-so 0.44, well below the 0.78 correlation had by the MBA’s Builder Application Survey (BAS) Index
- While the MBA & BAS Average Loan Size gauges spiked in October to a respective 8.6% YoY and 5.1% YoY, they’ve since retreated to 0.0% and -1.1% thus far in January; the BAS gauge has been negative in 23/last 28 months, a red flag that keeps waving for homebuilders