Official data released yesterday (Thursday) by The National Association of Realtors gave the markets an unexpected boost as the number of houses sold was greater than expected. This positive data was also coupled with news that house prices had risen at the fastest rate in two years.
The 1.9% increase in volume of home sales is thought to have been boosted by the Federal Reserve rate cuts made over the last several months as they have effectively lowered the cost of borrowing, making mortgages more affordable for more Americans and stimulating the housing market.
New home construction is also booming with figures revealing that the number of permits issued has reached a high not seen in more than a decade.
Additional increases to home sales could also be on the horizon, given Fed Chair Jerome Powell’s statement that a ‘sustained expansion’ was economically likely.
As you’d expect, markets reacted positively to the National Association of Realtors report, which provided a sense of stability following what has been a tumultuous period. The data also removes the spectre of risk with Lawrence Yun, the Association’s chief economist further soothing worries by remarking, “Historically-low interest rates, continuing job expansion, higher weekly earnings and low mortgage rates are undoubtedly contributing to these higher numbers. We will likely continue to see sales climb as long as potential buyers are presented with an adequate supply of inventory.”
Gold prices slipped back a little by end of day Thursday, falling 0.60% to $1,465.40. This level should be seen as an opportune moment to buy now and take advantage of the lull. While at first glance it may seem that there is nothing but good news in the data – under the surface there are clear signs that all is not as rosy as it looks, which means this window of opportunity to buy now could soon close.
The real estate market is plagued by a huge shortage of affordable homes, with fewer homes for sales and increasing prices meaning that some buyers are simply not able to afford to purchase a property. Yun says in fact that “prices are raising way too fast” due to the lack of homes for sale. Figures suggest that current inventory levels would be exhausted in just under four months if the pace of sales continues – the sweet spot between supply and demand is almost double that at seven months.
If you’re looking to invest, leverage the positive sentiment that is currently in play and bringing prices lower buy now before real estate reality bites.