Something old, something new
Existing-home sales slid 4.9% in January from December to a seasonally adjusted annual rate of 4.08 million homes. However, existing home sales did rise 2% from last January, the fourth straight monthly year-over-year increase. Sales of existing homes actually fell to the lowest level in 30 years in 2024 due to a persistent shortage of housing inventory. The good news is that inventory of existing homes is up 17% from a year ago, to about 3.5 months of supply. The bad news is that the relatively low supply and continued demand are still driving home prices higher. The median existing-home sales price jumped again by 4.8% from January of last year, marking the 19th consecutive month of year-over-year price increases.

Signed contracts for new single-family homes dropped 10.5% in January when compared to December to a pace of 657,000, according to the U.S. Census Bureau. January sales were also down 1.1% from a year earlier. The median sales price of new houses sold in January was $446,300, up 3.7% from the prior year. Last month’s typical sales price was the highest for any January on record, and also the highest of any month since October 2022, an all-time high. New home construction has provided a bit of a safety valve for the lack of supply of existing homes, but inventories of new homes have also been growing a bit of late after a strong period of building growth.

These conditions have impacted suppliers to the housing renovation market and homebuilders as well. The major home improvement retailers, Lowe’s# and Home Depot#, recently reported comparable same-store sales that turned positive for the first time in about two years. A strong holiday season, growth in the professional market and rebuilding efforts in the wake of last fall’s hurricanes helped boost sales. Ongoing pressure in do-it-yourself spending offset some of those gains, however, as lower turnover of homes means sluggish DIY sales. So while overall dollar sales ticked higher for Lowe’s and Home Depot last quarter, traffic in stores was actually down slightly.

Apply Yourself
Applications for a mortgage to purchase a home were flat last week but up 3% higher than the same week one year ago, according to the Mortgage Bankers Association. Treasury yields, which drive lending rates, moved a bit lower during the past week on softer consumer spending data as consumers have been feeling less upbeat about the economy and job market. This pushed mortgage rates lower, with the 30-year fixed rate decreasing to 6.88%, the lowest rate since mid-December. Mortgage giant Fannie Mae recently revised its 2025 forecast, projecting mortgage rates will average about 6.8% across the year, potentially dropping to 6.6% by year-end. Add this to elevated home prices, and it is easy to see why housing affordability remains challenging.

The drop in new-home sales and mortgage demand comes on the heels of a weak read on the future of new-home sales from builders earlier this month. Spooked by tariffs and potential immigration reform, builders are worried about construction costs, making them more pessimistic about their ability to sell newly constructed homes in the next six months.

So Far This Year
US stocks have trailed global peers this year as investors questioned lofty valuations and hefty spending on artificial intelligence. Magnificent Seven technology stocks have underperformed the broader market so far this year, while other sectors such as financials have performed better. The S&P 500 is up less than 2% in 2025, while a basket of the Magnificent Seven stocks has fallen 4.4%.

Nvidia#, one of the Magnificent 7 stocks, reported earnings last night. Growth for its AI chips continued to be strong this past quarter. However, margin guidance was lower than investors were expecting. Lofty expectations may have gone too far, though growth in AI should continue to foster earnings growth in the technology space. Warren Buffet in his recent shareholder letter noted that he is holding more cash while looking for opportunities to buy. We may not be building and selling as many homes as usual, but we continue to build a shopping list of ideas for purchase if any market downdrafts occur.

Singer Josh Groban turns 44 today, Actress Joanne Woodward turns 95, Ralph Nader safely turns 91 and I believe Journey guitarist Neal Schon turns 71.

Christopher Crooks, CFA®, CFP® 610-260-2219

Tower Bridge Advisors manages over $1.3 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.