The red-hot housing market could slow the economy
The phard and demand for real estate in the United States they are on the rise, but interest rates are not. Low rates also encourage purchasing power, but it could affect the Gross Domestic Product (PBP) of the current quarter according to Myles Udland at Yahoo Finance.
The housing economist Bill mcbride noted Wednesday that the economics group of Goldman sachs cut his forecast for the GDP of the current quarter, at an annualized growth rate of 8.75%, from a previous growth perspective that would reach the 9%. A little change, no doubt. But an example of how excess demand across the economy has some natural speed brakes.
On Wednesday, the May report on the new home sales showed that the pace of sales fell by 5.9% last month at an annualized rate of 769,000. The actual number of homes sold last month was the lowest in a year. This report followed Tuesday’s indicator on existing home sales, which declined for the fourth month in a row at an annualized rate of 5.8 million homes.
However, these drops in the pace of sales were accompanied by a continuous increase in pricesas the demand cannot be met. The average increase in the price of an existing home sold increased by 23.6% from last year in May, while the average increase in the price of a new home was 18.1% compared to last year. But this price increase cannot offset the negative impact on the growth of fewer homes in exchange.
Mahir Rasheed, American economist at Oxford Economics, He noted that while home sales are likely to remain flat or low for the rest of the year, the delays should keep homebuilder activity supported.
“Almost 90% of the inventory for sale in May was of homes where construction is in progress or has not started, while 36% of the homes already sold have not yet started,” Rasheed wrote.
“These delays should support activity for home builders even as the current pace of home sales moderates, although there are likely to be delays in the near term as builders grapple with supply chain issues.” added. Rasheed also noted that with falling lumber prices, construction cost pressures on buyers could ease.
Ian Shepherdson of Pantheon Macroeconomics he was less optimistic about the situation.
New home sales “appear to fall further, with a good chance that they will soon be back below the pre-COVID trend,” Shepherdson wrote. “The story here, we believe, is simply that demand in the suburbs has fallen as the fear of COVID has faded. Inventory is still low but rising rapidly; supply reached 5.1 months of current sales in May, compared to the 3.6 months of January “.
Shepherdson added that this data points to “an accident that is about to occur.”
“Earlier this month, we argued that falling timber prices reveal the future of this recovery. A future in which the sharpest price pressures ease just as they drop sharply. But sharp turns in the economy do not create healthy conditions. Rather, these turns set the table for investors who might not be optimistic enough heading into 2021 to suddenly find themselves caught offside in reverse, ”concludes Udland.