Rising mortgage interest rates and low consumer confidence are continuing to hurt the US housing market.
Data released from the US Commerce Department on Tuesday showed that new single-family home sales in the US plunged to their lowest in over two years last month.
The Census Bureau revealed that just 511,000 were sold in July. Last month’s figure was down 12.6% from the 585,000 new home sales in June, whose number was lowered by 5,000 from its initial estimate.
July’s new home sales figures were around half the number recorded during the peak of the Coronavirus pandemic. The pandemic brought about a need for more space as the move towards remote working spurred a house-selling boom in the US and beyond.
Matthew Walsh, an economist at Moody’s (NYSE: MCO) Analytics in West Chester, Pennsylvania said of the latest economic news from the world’s largest economy:
“The Fed is getting what it wants,”
“The housing market needed to cool, and higher interest rates were the only thing that was going to accomplish that.”
US Economy Slowing
This week’s latest report shows the fragility of the US economy at the moment. The Federal Reserve’s aggressive monetary policy tightening campaign is slowing the US economy. House prices in the US remain elevated but are showing signs of slowing down.
Now, with home sales down, home starts down and mortgage rates rising, the economic fragility of the US housing market is being exposed.
The numbers from the Census Bureau indicate that affordability, and not supply issues, is fast becoming the chief problem impacting the housing market. Although the US is not at the point where supply completely surpasses demand. supply levels in housing are rising. The number of houses for sale rose last month across all categories to its highest level since April 2008, around the time of the financial crash.
