Existing home sales rebounded in December from a pretty ugly (and downwardly revised) November, but only slightly. That would seem to suggest that there are more lingering problems as the real estate market tries to find its way back to the path it was on before the word “taper” was injected into the MBS market. Despite the average mortgage rate continuing to fall, there has yet been any appreciable effect on home sales; meaning that the mid-year rebound may amount to a dead-cat bounce after all.

ABOOK Jan 2015 NAR SAAR

Despite extremely favorable comparisons with the major decline in late 2013, December’s sales pace was only 3.5% above the same month a year ago. Like November, this tepid rise off that extremely low base may be indicative of growing reluctance to engage in home transactions regardless of mortgage rates.

ABOOK Jan 2015 NAR YY

The behavior of sale inventory seems to suggest exactly that. Total inventory for sale in December was actually slightly less than December 2013’s level. In the context of market performance this year, the amount of inventory that was pulled off the market (which is seasonal, to be sure, but this is far more than that as shown by year-over-year comparison) was significant.

ABOOK Jan 2015 NAR SupplyABOOK Jan 2015 NAR Inventory YY

This would further propose that not only are buyers apprehensive in the last two months of 2014, that sellers may be joining them in viewing the housing “market” as destabilizing or at least not quite living up to expectations. If that is the case, it would be similar to the dynamic of apartment construction, whereby builders (sellers) are also pulling back as buyers (renters) fail to materialize in sufficient numbers with sufficient means.

Even the NAR itself has acknowledged this as a major problem (though prefacing it by somehow alluding to “economic growth accelerated”):

Housing costs – both rents and home prices – continue to outpace wages and are burdensome for potential buyers trying to save for a downpayment while looking for available homes in their price range.

You know the narrative doesn’t quite match reality when sellers start to pull their homes off the market and even the NAR says, parroting once again the FOMC, that wage growth is a big problem. Unfortunately, these economists have the wrong idea about an economy if they can claim it to be “accelerating” without proportional wages, as that is the economy from bottom to top. It’s nice that GDP “accelerated” in the middle of 2014, but without wages that is simply artificial and, most importantly, unstable and unsustainable. That is the worry even here in the supposedly comfortable confines of real estate rebirth, as the winter is getting colder yet again.