U.S. home sales tumble as prices surge to record high

[Gefn]

WASHINGTON (Reuters) - U.S home sales fell more than expected in June as a persistent shortage of properties pushed prices to a record high, indicating the housing market was struggling to regain speed since hitting a soft patch last year.


Housing and manufacturing are the main areas of weakness in the economy. They are offsetting strong consumer spending, resulting in a slowdown in economic activity that, together with trade tensions and tepid global growth, could see the Federal Reserve cutting interest rates next Wednesday for the first time in a decade.

The National Association of Realtors said on Tuesday existing home sales dropped 1.7% to a seasonally adjusted annual rate of 5.27 million units last month. The median existing house price increased 4.3% from a year ago to an all-time high of $285,700 in June.

“Meager inventory levels, especially in the entry-level segment, and still-rising prices continue to limit the selection of homes available to more budget-conscious buyers,” said Matthew Speakman, an economist at Zillow.

Economists polled by Reuters had forecast existing home sales slipping 0.2% to a rate of 5.33 million units in June. Existing home sales, which make up about 90% of home sales, decreased 2.2% from a year ago. That was the 16th straight year-on-year decline in home sales.

The weakness in housing comes despite cheaper mortgage rates and the lowest unemployment rate in nearly 50 years.

Supply has continued to lag, especially in the lower-price segment of the housing market because of land and labor shortages, as well as expensive building materials. The government reported last week that permits for future home construction dropped to a two-year low in June.

According to the NAR, there was a 19% drop from a year earlier in sales of houses priced $100,000 and below. The Realtors group said there was strong demand in this market segment, but not enough homes for sale.

The NAR also said last year’s revamp of the U.S. tax code, which reduced the amount of mortgage interest payments homeowners could deduct, was weighing on demand for homes priced at $1 million and above.

The 30-year fixed mortgage rate has dropped to an average of 3.81% from a more than seven-year peak of 4.94% in November, according to data from mortgage finance agency Freddie Mac.

Last month, existing home sales rose in the Northeast and Midwest. They tumbled in the populous South and in the West.

June’s drop in existing homes sales likely means less in brokers’ commissions, which suggests that housing probably remained a drag on gross domestic product in the second quarter. Spending on homebuilding contracted in the first quarter, the fifth straight quarterly decline.

The Atlanta Fed is forecasting GDP rising at a 1.6% annualized rate in the second quarter. The economy grew at a 3.1% rate in the January-March period. The government will publish it snapshot of second-quarter GDP on Friday.

The PHLX housing index .HGX fell, underperforming a broadly firmer U.S. stock market that was boosted by upbeat earnings and forecasts from Coca-Cola (KO.N) and United Technologies (UTX.N). The dollar rose to a five-week high against a basket of currencies. U.S. Treasury prices were mixed.

TIGHT INVENTORY

There were 1.93 million previously owned homes on the market in June, up from 1.91 million in May and unchanged from a year ago. The tight inventory boosted house price inflation, which had been slowing after a jump in mortgage rates last year dampened demand for housing.

FILE PHOTO: A construction worker builds a single family home in San Diego, California, U.S. February 15, 2017. Picture taken February 15, 2017. REUTERS/Mike Blake
Economists, however, do not believe the re-acceleration in home prices reported by the NAR is a true picture of home values. In a separate report on Tuesday, the Federal Housing Finance Agency (FHFA) said its house price index rose a seasonally adjusted 5.0% in May from a year ago, slowing from an increase of 5.2% in April.

“We believe that the FHFA index is the more reliable indicator because the price measures reported in the existing home sales report don’t control for changes in the mix of sales,” said Daniel Silver, an economist at JPMorgan in New York. “The FHFA index continues to show that the pace of appreciation has been cooling lately, which is a message consistent with several other related measures.”

Last month, houses for sale typically stayed on the market for 27 days, up from 26 days in May and a year ago. Fifty-six percent of homes sold in June were on the market for less than a month. At June’s sales pace, it would take 4.4 months to exhaust the current inventory, up from 4.3 months in May.

A six-to-seven-month supply is viewed as a healthy balance between supply and demand. First-time buyers accounted for 35% of sales last month, up from 32% in May and 31% a year ago. Economists and realtors say a 40% share of first-time buyers is needed for a robust housing market.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

https://www.reuters.com/article/us-usa-economy-housing-idUSKCN1UI1T3

[Applewood]

Supply has continued to lag, especially in the lower-price segment of the housing market because of land and labor shortages, as well as expensive building materials. The government reported last week that permits for future home construction dropped to a two-year low in June.

Well, all I know is -- in my distressed neighborhood, we have plenty of existing homes for sale at rock bottom prices and there are a number of empty lots suitable for building.  But no one is buying here.    A house behind mine has been for sale for three years.    Last I heard the owner wanted $50,000.  He had put a lot of work into that home about 10 years ago and it looks like new.  But who wants to live in a neighborhood full of lowlifes, drug addicts, drug dealers and now -- illegals and alleged Middle Eastern "refugees?" 

Many of these homes end up as Section 8 or some other kind of government housing.  The people who live in these homes don't take care of them and some actually trash them deliberately.  A number of houses have been abandoned -- left to deteriorate.  There is one house up the street -- when I moved here in 1989. it was a stately old home.    Now it's occupied by stray, feral cats and assorted vermin, and the front yard is overgrown so much that it covers the sidewalk .  At one point the house was used as a "shooting gallery" for drug addicts.  The borough should go after the owners to fix or tear down these houses, but it doesn't have the resources to do so and at this point, I doubt the powers that be really care.

It's too bad.  This used to be a nice neighborhood -- good working people who took care of their homes even if they were tenants.  Now the neighborhood has gone to pot.  I think I'm one of the last homeowners who really gives a *bleep,* but lately, I've been thinking of selling.  I doubt I'll even recoup what I paid for this house in 1989, let alone the monies spent for improvements over the years.  And I can blame government-sponsored social engineering for that. 

[IsailedawayfromFR]

Not in Texas.  New home sales are setting records in some markets.

http://www.gopbriefingroom.com/index.php/topic,369121.0.html

[Free Vulcan]

If you were wondering where all that printed Fed money was going...