Pending home sales in US spring back to life

The number of pending home sales in the US has been declining over the last three months although thankfully the figures for June show a recovery. Aside from the Midwest, pending home sales were up by 1.5% with a near identical number of contracts signed in the first half of 2017 compared to the same period last year. However, when you bear in mind the US economy has created an additional 2.2 million jobs during that time do the figures stack up?

Lack of supply

One thing which is becoming more evident across the US is a fall in supply which is forcing buyers to act relatively quickly to bag their dream home. The increase in jobs is also putting pressure on the market especially when you consider there has been a staggering 7.1% reduction in household inventory compared to last year. This is an issue which is been replicated right across the globe, householders unwilling to sell and buyers desperate for stock.

The National Association of Realtors expects around 5.56 million home sales during 2017 which would be an increase of 2.6% on last year. Demand and a lack of supply will again squeeze prices higher with the national median existing home price forecast to rise by 5% in 2017 just short of the 5.1% increase in 2016. So, while existing homeowners will benefit from the expected price rise there is an acute need for more housing stock to keep buyers interested.

US base rates

The US economy is picking up, resulting in an additional 2.2 million net employment positions, and it seems that investors are willing to ignore the ongoing rise in US base rates for the moment. The fact that base rates are rising from such a low level probably means they will have minimal impact upon mortgage rates for the foreseeable future. However, if there were to be any economic wobbles (we have European economic challenges and a growing issue in North Korea) in the short to medium term this could put a very quick end to any short to medium term interest rate rises. The constant battle between President Trump and the Federal Reserve also looks likely to continue for many months to come!

When will we feel the Trump effect?

When Donald Trump came to office there were high hopes that he would positively assist the US real estate market. So far he seems to be busy elsewhere (his Twitter account is never quiet!) and we have yet to see any real assistance for the US real estate market. For a man who has decades of experience in US real estate it is surprising that he has not yet focused on this particular area despite his promises. Indeed, some investors would suggest that the real estate market is performing well despite of Donald Trump.

It is the net increase in jobs of late which will give the US economy momentum going forward and all eyes will be on consumer spending figures in the next few months. The economy, consumer spending and the real estate market are all intricately intertwined and with the economy picking up, the real estate market showing signs of life it seems inevitable that consumer spending will follow?

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