The U.S. Housing Market Is Emerging as a Clear Victim of Higher Interest Rates
As rates are going higher, we are seeing the U.S. housing data turn gruesome.
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Consider that in July, sales of already-built homes (existing homes) declined 0.7% from a month earlier. Year-over-year, sales are down 1.5%.
Here’s the thing, this is not a one-off event. On a year-over-year basis, July marked the fifth consecutive month of decline in existing home sales.
Saying the very least, there’s a clear trend here.
Lawrence Yun, the chief economist at the National Association of Realtors, said something very interesting about what’s happening in the U.S. housing market: “Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come onto the market.” (Source: “Existing-Home Sales Slip 0.7 Percent in July,” National Association of Realtors, August 22, 2018.)
New Home Sales Growth Rate Drops & Home Builders Turn Pessimistic
If you’re not convinced that higher rates are impacting the U.S. housing market, look at another chart below.
This chart plots the annual rate of new home sales in the U.S. economy.
(Source: “New One Family Houses Sold: United States,” Federal Reserve Bank of St. Louis, last accessed August 22, 2018.)
The annual rate of new home sales in the U.S. continues to decline. In November 2017, it stood at 712,000. In June, it was the lowest since October 2017 at 631,000. This is a deceleration of over 11%.
Those very close to the U.S. housing market, the home builders, are becoming pessimistic, too.
Look at the National Association of Home Builders’ Housing Market Index (HMI). At its core, it shows us the sentiment of home builders in the U.S.
In August, the HMI stood at the lowest level since September 2017. (Source: “Housing Market Index,” National Association of Home Builders, last accessed August 22, 2018.)
