With news in the US housing market moving in one direction, the Dow Jones struggled to decide where to go after the bell. After falling more than 150 points, the index has rebounded and fluctuated, and is currently up 0.34% at 25,959 points.
The confusion began with the headline that monthly home sales in May hit a 9-1/2-year low, with U.S. home sales down 9.7% to just 3.91 million units. This decline far exceeded the expected 3% drop in sales in May to 4.12 million units, making it the worst sales volume since October 2010.
Existing home sales account for about 90% of all home sales in the U.S., and the number of owner-occupied homes on the market in May was down 18.8% from the same month last year.
Furthermore, existing home sales in May decreased by 26.6% compared to the same month last year, the largest annual decline since 1982.
Meanwhile, the number of home loan applications reached a 10-year high in June. This is probably due to the slowdown in activity in the previous month, as well as lower offers from people who wanted to sell their properties but were unable to do so until now.
The question becomes whether home sales for the rest of the summer show signs of recovery. Analysts, like the Dow Jones today, seem to be stuck in two schools of thought.
Meanwhile, mortgage application numbers will suggest a healthy recovery is on the way by the time this month’s figures are released. On the contrary, bears probably have the long-term outlook in mind, citing 44 million jobless claims and a limited inventory of new homes under construction, which will likely limit any kind of rebound at best. I would expect it to be.
Chief Economist Chris Rupkey said: “Home sales may recover on pent-up demand following the economic shutdown that began in March, but large-scale job losses and cautious consumers are rebuilding their savings.” Therefore, the sales turnover rate of housing inventory may be limited.” At MUFG in New York.
One thing to keep in mind is the fact that a decrease in sales does not necessarily correspond to a decrease in price. Median home prices in the U.S. rose just 2.4% annually, the smallest increase since February 2012, but the rate of increase is expected to accelerate as the summer progresses. Regardless of the anticipated deterrents to homebuying, U.S. housing demand is likely to recover faster than new construction supply, which will inevitably impact prices.
Fortunately, the Dow Jones was willing to let the contrasting housing market data cancel each other out. And they’re even happier to ignore the rise in U.S. coronavirus cases and President Trump’s ill-conceived “joke” about slowing testing to stop the number of cases from rising further.
