• Sales of existing homes decline 8.5% in March, more than forecast.
  • Fresh evidence of severe US economic slowdown.
  • Sales rate drops to 11 month low at 5.27 million units.

Sales in the largest sector of the housing market fell more than expected in March sliding 8.5% to 5.27 million annualized units, according to the National Association of Realtors (NAR) on Tuesday.

 Even though the figures are based on closing for contracts largely signed in January and February before many state government closed businesses because of the Coronavirus it was the largest monthly decline in four years. Typically there is a one or two month delay between the contract and the actual transfer of the property at the closing while the buyer secures mortgage financing.

Existing home sales

FXStreet

Mortgage rates

February had seen a 6.3% spike in sales to 5.77 million, the best level in 13 years as customers were emboldened by the buoyant job market to take advantage of falling interest rates in what for most is their largest lifetime purchase.  

”Mortgage rates will be at super low conditions this year,” noted NAR chief economist Lawrence Yun.

Interest rates on a conventional 30-year fixed-rate mortgage averaged 3.45% nationwide in March, down from 3.47% in February and 3.62% in January. In 2019 the average was 3.94%.

Sales were up 0.8% from a year earlier (5.23 million in March 2019), rising for the ninth straight month. January’s is normally the slowest month of the year in the real estate market and the sales increase to February is historically the largest each year.

While the March sales numbers were within the range of the past four years Yun suggested that sales could fall 30% or 40% in the months ahead as the widespread economic shutdown of the commercial and retail sectors has thrown more than 22 million people out of work.

If accurate this would, at least temporarily bring sales back to the lowest point of the post-recession housing crash in July 2010 at 3.83 million units. .

US GDP headed to contraction

The housing market could be another sign that the jobs losses incurred by the business closures are affecting consumers’ long-term outlook.  

March’s economic closures even though limited to the last two weeks of the month are expected to have been severe enough to push the entire quarter into contraction despite the estimated 2.7% rate in late March in the Atlanta Fed’s GDPNow model. 

The first quarter GDP rate is predicted to be -4% annualized in the Reuters survey of economists and was at -0.3% from the Atlanta Fed on April 16, with an update due on the April 24.  The US economy expanded at a 2.1% rate in the final three months of 2019.

This would be the first negative quarter since the start of 2015 and only the third negative since the end of the financial crisis recession in June 2009. 

The Bureau of Economic Analysis will issue its preliminary estimate for Q1 GDP on Wednesday April 29, followed by two revisions at one month intervals.

Regional housing sales

Sales fell across the country in March led by the West down 13.6%, to 9.1% in the South, 7.1% in the Northeast and 3.1% in the South.

Price growth remained strong rising 8% on the year supported by a shortage of inventory, off 10.2%  last month from a year earlier. The median home price in March was $280,600.

“There was a housing shortage going into the virus,” said Yun, “Builders have been underproducing for ten years.”

Some gauges of availability showed a steep drop in the number of new listing in March which probably reflects the social distancing measures prevalent in much of the country. The NAR reported that 93% of sellers had changed their behavior to accommodate new social distancing restrictions most often offering virtual tours of properties instead of personal visits. 

Conclusion

While the home resale market is not a major contributor to GDP it is an indicator of the health and confidence of the consumer sector which is the dominant force in US economic activity.  If the decline in home sales persists and accelerates it will bode ill for consumption in the general economy. In the current highly risk averse market enviroment, economic trouble has supported the safety trade to the US dollar

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD recovers above 1.0150 as dollar loses strength

EUR/USD recovers above 1.0150 as dollar loses strength

EUR/USD staged a rebound in the second half of the day and turned positive above 1.0160. The disappointing Housing Starts data from the US caused the dollar rally to lose its stream and helped the pair erase its losses. The cautious mood, however, limits EUR/USD's upside. 

EUR/USD News

GBP/USD gains traction, rises toward 1.2100

GBP/USD gains traction, rises toward 1.2100

GBP/USD has turned north during the American trading hours and climbed toward the 1.2100 area. The dollar lost its strength after the US data showed a significant decline in Housing Starts in July and the US Dollar Index retreated from multi-week highs toward 106.50.

GBP/USD News

Gold stays below $1,780 as US yields push higher

Gold stays below $1,780 as US yields push higher

Gold came under renewed bearish pressure in the early American session and dropped toward $1,770. The benchmark 10-year US Treasury bond yield is up more than 2% on the day above 2.8%, not allowing XAU/USD to capitalize on renewed dollar weakness.

Gold News

Three reasons why meme coins Dogecoin and Shiba Inu are hot again

Three reasons why meme coins Dogecoin and Shiba Inu are hot again

Dogecoin and Shiba Inu prices break into a rally, offering holders gains. Dogecoin offered holders 16% gains over the past week, and competitor Shiba Inu yielded 30% profits.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures