Saturday, May 18, 2024

Despite Rising Home Sales, the Housing Market is Weak

Members of the Washington, D.C.-based National Association of Home Builders (NAHB) announced Tuesday that a brief decline in mortgage rates helped to boost new home sales in August.

Sales, however, are expected to move on a downward trend in the months ahead as mortgage rates have since moved higher. 

“The sales of newly built, single-family homes in August increased 28.8 percent to a 685,000 seasonally adjusted annual rate from an upwardly revised reading in July, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau,” NAHB officials said.

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“New home sales are down 14 percent on a year-to-date basis despite the August upturn.”

NAHB Chair Jerry Konter, in a statement, urged policymakers to find ways to reduce construction costs that delay home projects and put upward pressure on home prices.  

Chief Economist Robert Dietz, meanwhile, said the sales gain in August shows a clearly sidelined demand for housing, which was constrained by rising interest rates. 

“After a brief lull when mortgage rates fell below 5.3 percent for much of August, they have since jumped much higher in September and are now approaching 7 percent,” Dietz said.

“The Fed should take careful note of the weakening of the housing market given the policy lag involved with monetary policy. Housing is a leading indicator of economic conditions.” 

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As reported last week, home builder sentiment fell for the ninth straight month. The combination of elevated interest rates, persistent building material supply chain disruptions, and high home prices continue to take a toll on affordability.

NAHB officials reported in August that new home sales declined 29.6 percent from one year prior. New home sales fell in July to their lowest level since January 2016. 

NAHB members represent more than 140,000 members from the home building, remodeling, property management, subcontracting, design, and housing finance industries. Members said they will construct about 80 percent of the new housing units projected for this year.

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