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Merrill Lynch: Existing Home Sales have Peaked

We are calling it: existing home sales have peaked. We believe that the peak was at 5.72 million, reached in November of 2017. From here on, sales should trend sideways. If this is indeed the peak, it would be comparable to the rate we last saw in the early 2000s before the bubble set in. Here is the catch — while existing home sales have likely peaked, we do not think we have seen the same for new home sales. New home sales have lagged existing in this recovery and we believe there is room to run for new home sales, leaving builders to add more single family homes to the market.

The peak in existing home sales can largely be explained by the decline in affordability. With housing prices hovering close to bubble highs and mortgage rates on the rise, affordability has been declining.

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