Source: Zhitong Finance
With mortgage interest rates rising, this spring's home buying season didn't go as expected. According to economists, sales of existing homes and the volume of new home construction in the US may have declined in March.
The National Association of Home Builders (NAHB) said in a statement on Monday that buyers are once again on the sidelines. The organization's monthly builder confidence index stagnated in April after four consecutive months of growth. According to the index, builders remain slightly optimistic, but the sub-indicators for measuring potential buyer traffic are still weak, and respondents' expectations for single-family home sales over the next six months have declined slightly.
Robert Dietz, the organization's chief economist, said: “April's flat reading shows that there is potential for increased demand, but buyers are still hesitating until interest rate trends can be better judged.”
Economists expect the upcoming housing data to be released will reflect the weakness of the market in March. According to FactSet's consensus forecast, new housing starts — an indicator that measures the commencement of construction of new units — is expected to reach 1.48 million annualized adjustments, down 2.5% from the previous month. The number of licences — a leading indicator reflecting the number of authorized construction units — is also expected to drop to 1.5 million annualized adjustments, down 1.6% from the previous month. The data is expected to be released on Tuesday.
Existing home sales may also weaken in March, according to estimates. According to FactSet data, second-hand housing units sold last month are expected to reach 4.2 million units after annualization adjustments, down about 5% from February. The data will be released on Thursday.
CoreLogic's chief economist Selma Hepp said that this is not the expected trend in spring. “In the past, people had a lot of hopes for low interest rates, and they thought demand would be stronger.” Hepp said, “Then mortgage interest rates started to rise again, and buyers pulled back again as a result.”
The reason for disappointment is inflation expectations. Since this year, inflation expectations have changed rapidly with the heat of economic data. At the end of last year, investors expected the Federal Reserve to cut interest rates three times; currently, once or twice. As investors reassess the possibility of cutting interest rates, mortgage interest rates have also risen. According to Freddie Mac, interest rates recently stood at 6.88%.
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