Home Sales Slumped in the Second Quarter

Laura Kusisto and Sharon Nunn reported on the front page of today’s Wall Street Journal that, “Home sales slumped in the second quarter despite what was likely the strongest period for U.S. growth in years, the latest sign that the economic expansion faces headwinds.

“Existing-home sales slipped 0.6% in June from the previous month to a seasonally adjusted annual rate of 5.38 million, the National Association of Realtors said Monday. Compared with a year earlier, sales in June declined 2.2%.

Home sales have now declined on an annual basis in five of the first six months this year, a worrying trend since housing is considered a crucial indicator of overall economic health, economists say.”

The Journal article stated that, “By a number of measures, the economy looks to be accelerating after a long stretch of subpar growth. Economists are forecasting U.S. growth to exceed 4% for the second quarter when numbers are released on Friday. Jobless claims are falling, and corporate profit growth continues to looks strong.

But weakness in the housing market could muddy the picture. Housing contributes about 15% to 18% of gross domestic product. Existing-home sales help drive other sectors of the economy. Consumer confidence and home-improvement spending, construction and mortgage lending tend to suffer when home sales slump.”

Today’s article added that, “Mortgage-application volume decreased 2.5% in the week ending July 13, compared with a week earlier, including a 5% decline in purchase applications, according to an index put out by the Mortgage Bankers Association last week.

New home construction, which is the major driver of housing-related employment, has also struggled lately. Housing starts declined 12.3% in June from the prior month, according to the Commerce Department. That was the largest monthly percentage drop in about a year and a half, driven by construction declines in all regions of the U.S. for almost all types of housing.

“Realtors say some buyers have grown weary of the run-up in prices, especially after mortgage rates increased. Brook Hogan, a real-estate agent in Portland, Ore., said she has seen signs that consumers are growing more cautious, especially at the higher end of the market. ‘It’s definitely slowing. Buyer confidence is a big deal,’ she said.”

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