One economist can’t understand why housing sales aren’t doing better. Two others say things will change for the better any minute now. This week there was support for both views as home prices continued to slow and both pending home sales and interest rates fell again.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices voiced a bit of frustration this week. After citing the current low levels of unemployment, inflation, and interest rates he said, “Given the broader economic picture, housing should be doing better.”
Pending home sales (which notes the number of purchase contracts signed a year earlier) seem to support his contention. They have alternated between good and bad months since the beginning of the year and the National Association of Realtors (NAR) reports they fell again in April, down 1.5%. The numbers have failed to improve for the last 16 months.
NAR’s Chief Economist Lawrence Yun, who often sees the silver lining, says inventories of available homes are picking up and “It’s inevitable for sales to turn higher in a few months.”
Getting back to Blitzer; he says the moderate increases in real incomes should be expected to support a strong housing market; consumer sentiment about homeownership is high, and there doesn’t seem to be any distress in the market. The difficulty facing housing, according to him, “may be too-high price increases.” He certainly isn’t the first economist to voice this opinion.
At least the rising prices are moderating. The S&P Cash-Shiller 20-City Index for March was up 0.7% compared to February and up 2.7% on an annual basis.
Lower Interest Rates Help
If prices are still pushing the envelope (albeit a little less vigorously), at least interest rates are helping to keep things affordable. The 30-year fixed-rate mortgage dropped below 4.0% (averaging 3.99%) this week for the first time since January 2018. One year ago, the rate was 4.56%.
Sam Khater, Freddie Mac’s chief economist, says, “Lower rates should give a boost to the housing market, which has been on the upswing with both existing and new home sales picking up recently.”
It may be time to take advantage of our super-low interest rates. Give us a call.