National Association of Realtors reported last week an unexpected fall in U.S. housing sales—this appeared as based on retail sales and industrial production dropped in April.
Charlie Dougherty, an economist at Wells Fargo Securities in Charlotte, North Carolina, said, “A mismatch between strengthening entry-level demand and scarce entry-level supply is likely playing a role in the underwhelming sales pace, a significant breakout in existing U.S. housing sales is unlikely this year.”
Existing housing sales, which constitute about 90% of U.S. housing sales, fell 4.4% from a previous year. National Association of Realtors stated that there was a 10% tumble from a year ago in houses’ sale, which was priced $100,000 and less. The Realtors told there was not enough supply of homes for sale in this market section while the demand for homes was rich. The housing inventory in this price category fell 17.3% from a year earlier.
Tumbling mortgage rates and the lowest unemployment rate in nearly 50 years are uplifting demand for lower-priced homes. It was observed by NAR that the reduction in the mortgage interest rate was adversely affecting the demand for homes priced $1 million and plus. There has been a noticeable fall in housing sales in high tax states such as New Jersey and Connecticut.
Land and labor shortages are also the causes of the scarce supply of housing inventory, especially in the lower end of the market. Last week, a survey also showed that while single-family home builders were the most hopeful in seven months in May, they lamented that they “continue to deal with ongoing labor and land shortages and rising material costs that are holding back supply and harming affordability.”
Last week, the government reported that permits to build single-family homes fell for a 5th straight month in April, reaching their lowest level since November 2016.