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U.S. existing home sales rise in July, positive trend likely to continue
U.S. existing home sales rose 2.5 percent to 5.42 million units in July, with the month rise consistent with market expectations. Moreover, the sales data for the June month were upwardly revised 0.4 percent to 5.29 million. The larger single-family segment, where sales rose 2.8 percent or 130k, accounted for the entire gain, with sales in the condo/co-op segment staying flat in July.
Activity rebounded in three of the four wide regions, led by an 8.3 percent in the West, followed by gains of just below 2 percent in the South and Midwest. After decent gains in May and June, sales in the Northeast dropped 2.8 percent last month.
The number of homes available for sale dropped to a seasonally unadjusted 1.89 million units from 1.92 million in June, which dropped 1.6 percent year-on-year. At the current sales rate, unsold inventory is at a 4.2 month supply, down from 4.4 months in the month prior.
Home price growth has usually trended up over the last several months. Median existing home prices rose 4.3 percent in July year-on-year.
Recent rises in pending home sales were a solid indication that resale activity was in for a strong print this month. Today’s report, along with an upward revision to the month prior, reaffirms the notion that resale activity is slowly rebounding.
“We expect the positive trend in existing home sales to continue with demand supported by healthy income growth and a significant drop in mortgage rates since the end of last year. But with inventory levels still near historical lows, the supply side will remain a constraining factor, likely keeping near-term gains moderate in nature”, said TD Economics.
Positive consumer sentiment is another necessary ingredient to the positive outlook for resale activity in the coming months, but this element might offer some surprises.
“While the consumer has proven resilient so far, it remains to be seen what impact the U.S.-China trade spat will have on confidence levels, particularly as the next round of U.S. tariffs on China affect a larger share of consumer goods than previous rounds”, added TD Economics.