The U.S. housing market continues to send mixed signals. For example, existing home sales rose by 2.5 percent in July to a seasonally adjusted annual rate of 5.42 million units, according to the National Association of Realtors (NAR). That was better than expected and the prior month’s gain was revised higher. The annual rate of growth also turned positive (+0.6 percent) for the first time since February 2018, not too surprising since mortgage rates were drifting higher most of last year, whereas borrowing costs in 2019 have been steadily trending lower. Year-ago sales comparisons will likely continue to improve, especially if the Fed proceeds with additional policy easing, but other headwinds exist.
The median selling price, for instance, was $280,800 in July, up 4.3 percent from this same period last year and the 89th straight month of year-over-year growth. Although the pace of price appreciation is slowing it continues to easily exceed wage growth for many Americans, and therefore helps explain why rapidly falling mortgage rates have yet to provide a significant boost to the housing sector. More sellers entering the market could help with the inventory problem, and an uptick in home construction could improve affordability as well. Fortunately, single-family housing starts and building permits rose 1.3 percent and 1.8 percent in July, respectively, and homebuilder confidence in August matched the highest reading since October 2018. Perhaps most importantly, sales of new single‐family homes over the past three months have risen at an average 655,000-unit pace, comfortably above 2018’s mean 615,000-unit pace. This is an encouraging sign for the longevity of the economic expansion in America because new home sales are often viewed as a leading indicator that typically weakens considerably ahead of a recession.
Sources: Econoday, NAR, U.S. DoC, NAHB, FRBSL