Housing markets in several major economies have had a rough year, and headlines have noticed—with some worrying about potential spillover effects. However, we don’t think falling prices spell trouble for the global economy or stocks. Let us run through a global look at the data—and explain why we don’t see this as a big concern from a macroeconomic point of view.
Starting in the US, existing home sales fell -0.7% m/m in January—its 12th straight monthly contraction—to an annualized pace of 4 million, the weakest since October 2010.[i] Homes have also been sitting on the market for longer—33 days on average in January 2023 compared to 19 days a year earlier. This comes despite inventory that, while up 15.3% y/y in January, was still historically low at 980,000 homes for sale.[ii] Price rises have slowed on a year-over-year basis, and they are likely falling as of late, with the base effect keeping the overall rate up.
The trend is similar overseas. In the UK, house sales fell -3.0% m/m in January, the worst start to a year since 2015.[iii] Homes there are also spending more time on the market, with one in seven going six months before being sold, the highest proportion since February 2015.[iv] Canadian January home sales slipped -3.0% m/m, and prices were down an 11th straight month, according to the Canadian Real Estate Association.[v] In Australia, new home sales fell by -4.6% m/m in December, and property data firm CoreLogic found that, in volume terms, unit sales rose in just 2 of 25 regional markets in the 12 months to last November.[vi] On the Continent, Sweden has been one of the hardest-hit housing markets globally, with prices down -16% from last year’s peak—and the Riksbank anticipates the tough times will continue.[vii]
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