Sales of Homes in the US on the Rise Thanks to Strong Sales in the South

Miami real estate

Nationwide, the sales of new homes rose in the month of May. However, while this might initially seem like great news and that the real estate market is strong, it is important to realize that most of these home sales were from activity taking place in the south. Overall the purchases of new single-family homes were up by 6.7%, which was higher than what was projected by a substantial amount. The prediction from the economists was that the home sales would only increase by 0.9%.

What Was It that Caused the Growth?

The increase in sales that were seen in May is due mostly to what was happening in the south, where there was an increase of 17.9% in home sales. This was a massive gain. In fact, it was the largest gain that has been seen since the last part of 2014. In the Midwest, the rates remained flat, whereas they actually dropped in the West and in the Northeast.

It is also very important to remember when looking at this figure that there was a huge margin of error in May. In fact, it was a margin of error of 14.1%. Additionally, the numbers released are only indicative of new home sales, which make up only a small percentage of the overall home sales, which would include previously owned homes.

The sales for homes that already exist, including condos, townhomes, and single-family homes, was only up by 1.4% in May. The National Association of Realtors believe this was due to the fact that mortgage rates and prices are increasing. The mortgage rates are likely to increase a couple more times over the course of this year, and in the following years, as well. This is due to the Federal reserve raising interest rates, which they hope will help them to deal with inflation. However, it does mean that the prices for homes are going to go up.

This has caused some buyers and potential buyers to consider some of the other ways that they can get the money they need for a loan. Rather than turning to the traditional lenders, they are instead looking at nonbank mortgage lenders. They believe that they can get better deals than they can with traditional banks. Additionally, because of the rise in rates, there are many lenders who are looking to become more competitive, and they are trying to make it easier for buyers in the Florida area to get homes.

While these both seem like good options currently, and they can spur more sales, there is also some danger associated with them. With the traditional lenders, they are taking on more risk than they might be comfortable doing, and they could be letting people borrow who should not. In addition, the nonbank mortgage lenders do not have the regulation and liquidity of traditional lenders, which could also cause some issues for borrowers down the line.

Are We Due For A Recession in 2019?

GDP Graph

Is a recession looming? It’s an important question because the U.S. economy has been experiencing one of its longest expansions ever. There were two recessions in the 1970s, two in the 1980s, one in the 1990s and two in the 2000s. Since 2010, there have been none.

Is there A Trigger?

Every recession has a trigger. In the 1970s it was energy price shocks. Could that happen today? Probably not, because the U.S. is now the world’s biggest oil producer. one potential trigger could be an unsustainable rise in borrowing. But the fact is consumer debt has risen only about 5 percent annually for the last few years. Although that’s fast, it’s not catastrophic. Past recessions were preceded by debt increases of 10 percept or more. More importnat, the largest part of household debt is home mortgages and those loan balances total about $10 trillion today, about the sme as 10 years ago even though housing values in the aggregate have climbed from $18 trillion to $28 trillion.

Another trigger could just be psychological. Pessimism leads consumers to spend less. That leads businesses to scale back, reduce investment, and not build that additional factory or office. But consumer confidence this year is at an index level of 127, the highest reading in more that 20 years!

Finally it could be policy error. Turkey is an example of how a decision – lowering interest rates in the face of rampant inflation – can lead to a crisis.

Although it’s not clear what could trigger the next recession, it’s a good bet it won’t have anything to do with our industry. The housing market still has room to grow. A total of 6.1 million existing homes plus newly constructed homes will be sold this year. That’s the same level as in 2000, when the market was considered well balanced. Homebuilders are at last responding to pent-up demand by increasing housing starts and creating jobs. For these reasons, the odds of a recession in 2019 are slight. And if we do see a drop in GDP, it will likely be mild – nowhere near the intensity of the recession a decade ago.

Concerns about a housing slowdown NOT supported by the data. However, the pace of existing home sales is expected to decline slightly by the end 2018, despite population and economic growth, lower unemployment, and modest wage gains. Declining affordability is the issue.