US home sales in July rose above expectations in July, with a strong labor market and the effects of lower mortgage rates boosting the struggling housing market.
- The National Association of Realtors stated that existing home sales rose 2.5% in July to a rate of 5.42 million units vs. 5.39 million expected.
- The pace of sales in June was revised slightly higher from the initially reported 5.27 million units.
- Rate cuts may be having a positive impact on the economy, and this will inform policymakers of upcoming decisions before the end of year.
Existing home sales account for 90% of all home sales, and last month’s increase saw the first instance of an annual increase in 17 months. The central bank’s rate hike campaign caused the housing market to slide last year and throughout much of 2019.
The Fed then cut rates for the first time in over ten years, faced with a slowing global economy, a punitive trade war, and tame inflation pressure, all of which raises the risk of recession. The rate cuts came despite the lowest employment rate in nearly 50 years – the US Labor Department reported on Wednesday that the overall level of employment was actually 0.3% lower in March than previously estimated, a difference of 501,000 jobs.
Existing home sales rose in all regions but the Northeast. The 30-year fixed mortgage rate dropped to an average of 3.77% in July from the peak of 4.94% in November. July saw 1.89 million previously owned homes on the market, down 200,000 from June and down 1.6% from last year.
The median house price rose 4.3% annually to 280,800 in July. At July’s sales pace, it would take 4.2 months to exhaust the inventory of homes on the market, down from 4.4 months the month prior. A six-to-seven month supply is considered ideal for balancing supply and demand.
— NAR Research (@NAR_Research) August 21, 2019
"Falling mortgage rates are improving housing affordability and nudging buyers into the market," said NAR Chief Economist Lawrence Yun.
However, he said, "The shortage of lower-priced homes have markedly pushed up home prices."
Analysts at RDQ Economics predict a stronger housing market throughout the second half of the year.
"The decline in mortgage rates appears to have arrested the decline in existing home sales and now appears to be fueling a moderate recovery in housing activity," RDQ said in a note.
"Price gains continue to run well-ahead of inflation and the supply of homes for sale remains tight."
Gold faced some selling pressure today, but remains above $1,500/oz after dipping below support earlier in the session. Spot gold last traded at $1,503.64/oz, down -0.06% on the day with a high of $1,507.95/oz and a low of $1,496.80/oz.