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Strong demand fundamentals to encourage more home building in U.S., says Wells Fargo

U.S. existing home sales are likely to have dropped slightly in June. In May, resales had risen 1.3 percent to a 5.62 million annualized pace. Sales of existing homes are constrained by unusually lean inventories of homes for sale that has made for a quite competitive market for would-be homebuyers across much of the nation.

The typical home was on the market for just 27 days before being sold in May. Tight inventories have stimulated the median selling price to a record USD 252,800 in May. Tight inventory was a drag on pending home sales in May, which is a good predictor for June existing sales.

Pending sales dropped 0.8 percent in May, its third straight decline. Demand for homes is strong, stimulated by rising incomes and job prospects, though supply is expected to be a limiting factor. The competitive market and rising prices are expected to continue for some time, but solid demand fundamentals are likely to keep encouraging more home building, noted Wells Fargo in a research report. Existing home sales are expected to have come in at 5.60 million in June, added Wells Fargo.

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