U.S. home sales fell in August, industry data showed Thursday, but lower mortgage rates and rising supply were likely to boost the industry.
Existing home sales fell 2.5% last month from July to a seasonally adjusted annual rate of 3.86 million, according to the National Association of Realtors (NAR).
That was largely in line with the consensus of 3.90 million expected by analysts.
“Home sales were disappointing again in August, but the recent development of lower mortgage rates combined with rising inventories is a strong combination that will provide the environment for sales to pick up in the coming months,” said the chief economist of NAR, Lawrence Yun.
Home buyers in the United States are facing a sharp rise in mortgage rates after the US central bank quickly raised its key lending rate in 2022 to tackle inflation.
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But with growing expectations that the Federal Reserve was about to turn to rate cuts after keeping interest rates at a decade-high level for months, mortgage rates have also shifted lower.
The popular 30-year fixed-rate mortgage averaged 6.2 percent on Sept. 12, according to mortgage lender Freddie Mac — hitting its lowest level since February 2023.
A year ago, the figure was around 7.2%.
On Wednesday, the Fed began a process of easing monetary policy with a bold rate cut of half a percentage point, boosting expectations that mortgage rates will fall further.
Limited supply?
“Existing home sales fell to a 10-month low in August, but indicators such as mortgage applications point to an increase in sales in September and October,” said economist Nancy Vanden Houten of Oxford Economics.
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But Pantheon Macroeconomics’ Oliver Allen warned that a mortgage rate of six per cent remains “well above the average rate of around four per cent on the stock of existing mortgages”.
“So moving home and taking out a new mortgage still requires a prohibitive jump in monthly payments for most current homeowners,” he said in a note.
“Therefore, a limited supply of existing homes for sale will continue to hinder sales,” Allen added.
Compared to a year ago, NAR data showed existing home sales fell 4.2% in August.
The median price rose 3.1 percent from August 2023 to $416,700, with the four U.S. regions posting price jumps.
Yun said in a media call on Thursday that although home sales are struggling, home prices have remained high.
Source: AFP