The Week Ahead: The Certain Future of Existing Sales

Although the market may be facing challenges such constrained inventory and home price appreciation outpacing wage growth, existing-home sales have a bright future ahead, according to industry economists.

The National Association of Realtors (NAR) believes that 2016 will be the best year for existing-home sales since the pre-crisis year of 2006.

The NAR reported last month that existing-home sales rose 5.1 percent to a seasonally adjusted annual rate of 5.33 million in March from a downwardly revised 5.07 million in February and 1.5 percent year-over-year.

NAR Chief Economist Lawrence Yun, in presenting his midyear economic and housing forecast at the 2016 Realtors Legislative Meetings & Trade Expo on Thursday, said that even though existing-home sales were uneven in the first quarter, they are still ahead of last year’s overall annual pace (5.29 million compared to 5.26 million).

All this points to a forecast of an annual pace of 5.40 million for existing-home sales in 2016, which would be the best year since 2006 (6.48 million). Yun expects home price appreciation to moderate to between 4 and 5 percent after rising to 6.8 percent last year.

“The housing market continues to expand at a moderate pace in spite of the fact that home prices are rising too fast in some areas because of insufficient supply fueled by the grossly inadequate number of new single-family homes being constructed,” Yun said. “The good news is that pending sales in recent months have remained stable and should support a modest gain in home sales heading into the summer.”

Ten-X's Residential Real Estate Nowcast expects existing-home sales to outperform the previous month in April with a 3.6 percent increase from March and a 7.4 percent year-over-year increase. The company projects that sales will fall between seasonally adjusted annual rates of 5.3 and 5.7 million, with a targeted number of 5.52 million.

Ten-X Chief Economist Peter Muoio explained, “U.S. home sales have recently been subject to volatility on a monthly basis, mostly due to external factors. However, beneath that volatility are clear signs that sales activity is floating at a relatively high level overall. And, while concerns remain over broader trends such as global economic volatility, weak first quarter U.S. GDP growth, and persistently lower oil prices affecting energy-based companies, the U.S. housing market stands firmly on solid ground supported by a solid labor market.”

The NAR is set to release April's existing-home sales data on Friday, May 20, 2016.

House Financial Institutions and Consumer Credit Subcommittee hearing, “Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers?”, Wednesday, May 18

Now that the Consumer Financial Protection Bureau (CFPB) has announced its proposed rule to prohibit financial firms from using mandatory arbitration clauses in business contracts with consumers, Congress wants to see if this rule will actually help the public.

On Wednesday, May 18, at 2 p.m .EST, the House Financial Institutions and Consumer Credit Subcommittee will hold a hearing entitled “Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers?” The CFPB proposed a rule on May 5 to ban the use or arbitration clauses by businesses after months of discussion about the proposal. The Bureau is trying to keep businesses from requiring consumers to agree to arbitration clauses in financial contracts because the clauses deny consumers the opportunity to sue the businesses at a future date.

Eric Goldberg, Senior Counsel at CFPB, said that these clauses typically state that either the company or the consumer can require that disputes be resolved by privately appointed arbitrators, except for cases brought in small claims court.

“Where these clauses exist, either side can generally block lawsuits from proceeding in court,” Goldberg stated. “These clauses also typically bar consumers from bringing group claims through the arbitration process. As a result, no matter how many consumers are injured by the same conduct, consumers must proceed to resolve their claims individually against the company.”

Under Dodd-Frank, the CFBP is required to conduct a study of arbitration clauses and their use in conjunction with financial products, and then to regulate the use of arbitration clauses in a consistent manner with the report to Congress; the Subcommittee members will examine both the CFPB's report and the proposed rule.

Here is the lineup for the week:

Monday, May 16, 2016 

National Association of Home Builders (NAHB) Housing Market Index (HMI) 10:00 A.M. EST

Tuesday, May 17, 2016

U.S. Census Bureau and HUD Residential Data 8:30 A.M. EST

Wednesday, May 18, 2016

Federal Open Market Committee Minutes 2:00 P.M. EST

House Financial Institutions and Consumer Credit Subcommittee hearing, “Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers?”, 2:00 P.M. EST

Friday, May 20, 2016

National Association of Realtors (NAR) Existing-Home Sales 10:00 A.M. EST