Housing Data Proves No Recession In Sight

Some individuals have been predicting that a downturn is coming to the United States. 

However, these predictors were sorely disappointed with the release of the newest housing data. 

This data is showing that there is no pending recession knocking on our doorsteps.

U.S. Existing home sales, months’ supply, and inventory from the end of 2005 – 2009 is found below:

The Jump

Single-family households in the United States have reached the highest level of purchases in over eight years. 

Wall Street is saying that this is representative of a healthy housing market.

Sales of homes have increased by 3.5%. 

This brought it to an annualized pace of around 592,000. 

This is the fastest past that has been seen since 2008.

New-home purchase data for the government are subjected to fluctuations from one month to the next.  

However, a look at the bigger picture is showing that there have been steady gains in residential real estate. 

This is being contributed to:

• Stable and permanent employment
• The small costs associated with borrowing.

The fact that wages are growing faster and building properties are being priced to accommodate buyers that are just entering the market can potentially make the market even stronger.

Deutsche Bank Securities Inc. economist Brett Ryan stated that the recovery is ongoing. 

He further indicated that the necessary groundwork is still assisting housing. 

He said that this should lead to a trend for at least the next year of steady growth.
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What the Numbers Look Like

Estimates from economists are fluctuating between 525,000 and 575,000. 

In May, the reading was changed to reflect a pace of 572,000 from the 551,000 previously estimated pace.

The report stated that there was a 90% confidence rate that the sales change would be a drop of 20.4% to a climb of 27.4%

The increase in demand:

• Was led by the West with a 10.9% increase
• Sales rose 10.4% in the Midwest reaching an annualized rate of 85,000.

o    This is the strongest it has been since 2007

• The South and Northeast regions saw purchases ease

The supply of homes reached 4.9 months, which is down from May’s 5.1 months. 

244,000 new houses were in the market when the end of June came. 

The prior two months had 241,000.

In June of 2015, the median sales price for purchasing a new house increased 6.1%, reaching $306,700. 

This gain showed that homes between $400,000 and $500,000 were purchased more often. 

18% of all homes sold last month fell in this price range.

The median and average sales prices of new homes that are sold in the United States from 1963 to 2011 is shown below.

Homes that Already Exist

The purchase of homes that were owned before climbed unexpectedly to a level that hasn’t been seen in nearly ten years. 

This was mostly due to first-time buyers. 

First-time buyers haven’t accounted for such a percentage of sales since 2012.

The following shows the average rate on a 30 year mortgage:

The Trend

Rob Martin, a Barclays Plc economist, said that these reports reflect the strength that the housing market has held onto over the past months. 

He also stated that it is expected the property market will get stronger through the next term. 

He says the resilient household sector is assisting the prices and volumes.

A reassuring trend was reported for the housing market by Bespoke Investment Group Strategist George Pearkes. 

He stated that the data was reverse what is seen right before an economic downturn takes place.

Over the past few decades, sales for new homes typically either remained flat or would begin to decline. 

However, the data that was released shows that they are going in reverse of this trend.

Societe Generale SA analysts are saying that home sales are continuously becoming stronger because:

• The labor market is improving
• There have been adequate gains in wages
• Mortgage rates have almost hit record lows

Overall

Others have also stated that this data reflects good things for the United States economy.

Renaissance Marco Research head of economics, Neil Dutta, reported that when the sales of homes begin going up, the spending on other goods that are durable picks up soon. 

He says that the average price of sales has reason around 8.8% from last year. 

He says that this is a good sign for homebuilders in the United States.

S&P Homebuilders ETF is enjoying a .5% increase in trading, while the S&P 500 has dropped by .23%.