US: Housing looks set to drive stronger economic growth – Wells Fargo

On Wednesday, the report on Existing Home Sales in the US showed a 3.6% increase in December. According to analysts at Wells Fargo, lower mortgage rates have brought buyers back out, but they warn inventories remain thin.

Key Quotes: 

“Sales of existing homes rose a solid 3.6% in December to a 5.54 million-unit pace, which is the strongest since February 2018. Lower mortgage rates have brought buyers back into the market, particularly in the South and West, where population and employment growth remain exceptionally strong. The strength in existing home sales follows a string of positive housing reports and should offset some of the drag being exerted on the economy from sluggish global economic growth.”

“The December data are consistent with the pending home sales data, which had risen solidly in previous months. Existing home sales reflect closings, while pending home sales reflect purchase contracts. Most of the leading indicators of home sales suggest that the positive momentum should carry over into 2020. Mortgage applications for the purchase of a home have risen solidly so far this year, consumer confidence remains high and household balance sheets are in solid shape.”

“Preliminary data show existing home sales for 2019 totaling 5.34 million units, which is even with their 2018 level but is slightly below our forecast for the year. We are expecting sales to rise 1.4% in 2020 to 5.435 million units but we will need to see more sellers to hit that level. The number of existing homes for sale at the end of December fell 14.6% from the prior month and is down 8.5% from last December. At the current sales pace, there is just a 3.0 months’ supply of homes available for sale.”