US August home sales hit 12-month low
WASHINGTON: US home resales fell to their lowest in a year in August as Hurricane Harvey depressed activity in Houston and a perennial shortage of properties on the market sidelined buyers.
The third straightly monthly decline in sales reported by the National Association of Realtors on Wednesday came on the heels of data on Tuesday showing a drop in home-building activity in August. The reports suggest housing will probably weigh on economic growth again in the third quarter.
“One of the risks out there for the broader economy is that this house of cards comes tumbling down,” said Chris Rupkey, chief economist at MUFG in New York. “The housing sector is the one area of the economy that just never reached a full recovery from the recession.”
Existing home sales decreased 1.7 per cent to a seasonally adjusted annual rate of 5.35 million units last month. That was the lowest level since August 2016. The NAR said Harvey, which struck Texas in the last week of August, had resulted in sales in the Houston area falling 25 per cent on a year-on-year basis.
Stripping out Houston, existing home sales would have been unchanged in August, the Realtors group said. Home resales in the South tumbled 5.7 per cent last month.
Harvey, and a second hurricane, Irma, which slammed Florida early this month could hurt September home sales. Texas and Florida account for more than 18 per cent of existing home sales. Sales lost because of delays in closing contracts will be recouped in 2018.
HOUSING STALLING: Even before the hurricanes struck, home sales had virtually stalled amid tight inventories that have resulted in home price increases outpacing wage gains. Sales were up 0.2 per cent from August 2016. A second report on Wednesday from the Mortgage Bankers Association showed mortgage applications fell last week “As we continue to process the thirdquarter housing data, we are gaining confidence in our view that real residential investment will fall during the quarter,” said Daniel Silver, an economist at JPMorgan in New York.
Housing subtracted 0.26 percentage point from gross domestic product growth in the second quarter.
Builders have blamed shortages of labour and land as well as higher costs of building materials for their inability to ramp up construction. Economists and builders say Harvey and Irma could worsen the housing shortage as scarce labour is pulled toward the rebuilding effort and materials are bid higher.
A report on Tuesday showed housing completions tumbling to a 10-month low in August. The NAR said the number of homes on the market fell 2.1 per cent to 1.88 million units in August.