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U.S. Housing Market Setting Up to Disappoint With Home Price Declines Lombardi Letter 2019-05-28 09:38:56 U.S. housing market home prices U.S. home sales U.S. economy The U.S. housing market could be setting up to disappoint. Data suggests that buyers are diminishing and not interested. Home prices in the country could fall, and it could have dire consequences for the economy. U.S. Economy https://www.lombardiletter.com/wp-content/uploads/2019/05/iStock-1135515857-150x150.jpg

U.S. Housing Market Setting Up to Disappoint With Home Price Declines

U.S. Economy - By |
U.S. Housing Market Setting Up to Disappoint

iStock.com/Andrii Yalanskyi

Data Suggests U.S. Housing Market Facing Headwinds

The U.S. housing market continues to face a lot of headwinds. Over the past few years, home prices have increased, but don’t be shocked if they decline in the coming months and quarters.

Know this: buyers are very critical to the housing market. Sadly, right now, it looks like buyers are declining in numbers.

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Consider this: according to the U.S. Census Bureau, sales of new single-family homes in the U.S. declined seven percent in April from March! The annual rate of sales in April was 673,000 new homes. In March, this rate was 723,000 new homes. (Source: “Monthly New Residential Sales, April 2019,” U.S. Census Bureau, May 23, 2019.)

Look at housing starts as well. It’s another indicator for the health of the U.S. housing market. This figure essentially tells us how many homes are being constructed. The higher the demand in the housing market, the higher the number of housing starts.

In April, housing starts came in at an annual rate of 1.2 million. This was 2.5% below the April 2018 figure. (Source: “Monthly New Residential Construction, April 2019,” U.S. Census Bureau, May 16, 2019.)

But don’t just stop at the new home sales and new home construction data; look at the existing home sales as well. These are homes that are already built.

According to the National Association of Realtors (NAR), existing home sales fell 0.4% in April from March to an  annual rate of sales of less than 5.2 million. Year-over-year, existing home sales were down 4.4%. (Source: “Existing-Home Sales Inch Back 0.4% in April,” National Association of Realtors, May 21, 2019.)

Clearly, all these indicators are saying that people are not interested in buying a home in the United States.

Shouldn’t Buyers Be Jumping In When Mortgage Rates Are Falling?

Here’s something interesting to note: as we see U.S. home sales figures come down, we are seeing mortgage rates also decline. This shouldn’t be ignored.

Usually, low mortgage rates lead buyers to jump in.

Look at this: in November 2018, 30-year fixed mortgages were given out at an interest rate of 4.94%. Now these rates sit at 4.06%. (Source: “30-Year Fixed Rate Mortgage Average in the United States,” Federal Reserve Bank of St. Louis, last accessed May 27, 2019.)

This decline in interest rates may not sound so big, but if you look at it from a percentage-change perspective, it is sizeable. Mortgage rates declined by close to 18% between November 2018 and now. In the grand scheme of things, this is a big decline and should have brought in more buyers.

U.S. Housing Market Outlook: Decline In Home Prices Could Be Next

Dear reader, right now we are seeing U.S. home sales decline across the board, and this is happening as mortgage rates are going down.

I wouldn’t be shocked if sellers end up being forced to lower their prices to lure buyers. If enough sellers do this, we could be seeing home prices declining soon in the U.S. market.

In the midst of all this, I am keeping a very close watch on home construction companies in the United States. If the housing market faces troubles, they could get the worst of it. If it’s bad enough, their stock prices could drop.

Also, don’t forget: the U.S. housing market has a massive impact on the economy. A downturn in the housing market could eventually be bad news for the U.S. economy.

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