U.S. existing-home sales get boost in July from lower mortgage rates

The numbers: Sales of previously-owned homes edged up 2.5% in July, as mortgage rates offset the affordability crunch caused by high home prices at the margins.

Existing-homes occurred at a 5.42 million seasonally-adjusted annual pace, up from a revised 5.29 million in June, . Compared with a year ago, sales were 0.6% higher.

Economists polled by MarketWatch had expected an average annual rate of 5.40 million.

What happened: The median sales price increased 4.3% from the prior year to $280,800. While the rate of home price appreciations has slowed considerably this year, prices continue to rise thanks largely to the constrained inventory of homes for sale.

Sales surged 8.3% in the West and increased by a more modest 1.6% in the Midwest and 1.8% in the South. In the Northeast, transactions fell 2.9%, even though this was the only region that did not see home prices rise over the past year.

Big picture: The precipitous drop in mortgage rates throughout 2019 has translated into the largest spate of refinance activity in years, but has yet to spark a resurgence in home buying. Would-be buyers are still hamstrung by the lack of inventory. As of July, it would take 4.2 months for all homes available on the market to be sold, down from 4.4 months in June. That’s well under the 6-month benchmark for home inventory that designates whether the market is balanced, suggesting that it is still a seller’s market.

Nevertheless, the decline in interest rates could expand affordability for prospective buyers at the margins given the historically high home prices across many markets nationwide. That could buoy home prices in expensive coastal markets, where some sellers have been forced to cut prices to stoke interest.

Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with MarketBeat.com's FREE daily email newsletter.

“Mortgage rates are important to consumers, but so is confidence about the nation’s overall economic outlook,” said Lawrence Yun, chief economist for the National Association of Realtors. “Home buying is a serious long term decision and current low or even lower future mortgage rates may not in themselves meaningfully boost sales unless accompanied by improved consumer confidence.”

What they’re saying: “Although lower mortgage rates are stirring the housing pot, a lack of pent-up demand, economic uncertainty and lofty prices in some major cities are keeping the market on low simmer,” Michael Gregory, deputy chief economist at BMO Capital Markets, wrote in a research note.

Others were more upbeat on the market’s future amid falling rates. “We are optimistic that the latter part of this year and the early months of 2020, at least, will see a significant upturn in sales. That, in turn, will boost construction activity in due course,” wrote Ian Shepherdson, founder and chief economist of Pantheon Macroeconomics, in a research note.

Market reaction: The 10-year Treasury yield  has dipped to the lowest level in three years amid concerns regarding trade relations and a global economic slowdown.

The Dow Jones Industrial Average  and the S&P 500 were trending higher Wednesday morning. But recession worries have dogged markets as of late, and investors have remained cautious this week so far in anticipation of Fed chairman Jerome Powell’s speech at the annual Jackson Hole symposium on Friday.

Leave a Reply

Your email address will not be published. Required fields are marked *

*