© Reuters. Existing Home Sales Appear to Be Muted More by Price Than Supply

(Bloomberg) — The disappointing existing home sales release this morning may be due more to near-record high home prices than lack of supply.

In the six year span between 2000 to 2005, during the lead up to the housing mania that culminated in the Great Recession, the annualized rate for existing home sales was 6.02 million, according to data compiled by Bloomberg. Over the same time frame, supply of existing homes for sale averaged 4.5 months.

During the time frame from 2014 until now, the data appears similar with the annualized run rate at 5.3 million while supply has averaged 4.4 months. Yet, despite supply between the two periods being much the same, some point to a “lack of supply” for the relative paucity of sales now. Arguably, the problem is just as much if not more the lack of a stable dollar.

During the 2000 to 2005 period, the dollar lost 63% of its value versus existing homes. From 2013 year-end to now it has lost 35% versus housing. For this millennium as a whole, the value of a dollar has dropped about 50% versus the existing housing stock.

Existing home prices hit a record of $274k last June, and currently stand at about $267k. From 2000 to 2017, median household income (in current dollars) for Americans with college degrees rose a little over 40%. Meanwhile, the median price of homes doubled, using CPI as a measure.

The inability of the U.S. dollar to hold its value versus real estate may be a primary factor as to why homes aren’t being sold at a faster clip — prices are simply outstripping the ability of many to afford a home, and saving for one using the dollar is a losing proposition.

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Investors, however, can look on the bright side of this issue. Lower demand for housing translates into lower supply in the mortgage-backed security sector, helping investor performance. As of May 10, net supply this year totals $39 billion versus $73 billion over same period in 2018, according to Bank of America (NYSE:) data.

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