Yesterday’s latest release of new home sales renewed talk that the much-discussed slowdown in housing has been greatly exaggerated. Don’t believe it. A cooling of the property market is unfolding. What’s debatable is the type and degree of aftershocks that will accompany the slowdown. On that, at least, there’s reason to pare one’s fears, if only slightly.
Yes, the May data for new sales of single-family homes for last month posted an unexpected pop, the U.S. Census Bureau reported yesterday. What’s more, the gain in May not only exceeded the consensus forecast; it was also the third straight month of higher sales, as the chart below illustrates.
But lest one thinks it’s time to rethink the notion that the real estate market is defying gravity, consider the broader perspective.
For starters, the number of homes sold dropped by 5.8% to 1.23 million, as of last month relative to a year earlier. Over the same period, the number of houses for sale jumped by nearly 24% to 556,000. More houses for sale and fewer sales. You don’t have to be an expert in property management to take the hint of what’s coming.
What’s behind the rise in the supply of houses for sale while the number of homes sold has dropped? Perhaps it’s the fact that mortgage rates are rising, making it more financially burdensome to buy homes. The standard 30-year fixed-rate mortgage was 6.83% last week–the highest in more than four years, according to a survey by Bankrate.com. The Fed seems inclined to keep that rate moving higher, insuring that the relative allure of real estate will wane further.