On Thursday, housing data from US Commerce Department had revealed that the pace of growth in new home sales in August had surpassed the levels last seen before the Great Financial Depression in 2006, suggesting an intransigent spike in demands for new homes as the pandemic outbreak had been forcing a flurry of “work-at-home” employees to leave the densely populated US cities despite lingering angsts over the fate of US economy.
In point of fact, according to the US Commerce Department data released earlier in the day, sales of new homes in the United States rose by a robust 4.8 per cent to a seasonally adjusted 1.01 million units in August compared to the same time a year earlier, while a strong August data in new home sales came against the backdrop of a record 13.9 per cent jump in new home sales in July, pointing towards a pursuit for safety into the suburbs and the countryside among the Americans as a second wave of pandemic outbreak appears to be brewing over the horizon.
Record low mortgage rates drive sales far more strongly than anticipated
Meanwhile, followed by the release of Thursday’s housing data, referring to an average of record low mortgage rates in the United States which had long been hovering below a 3% level amid a near-zero overnight lending rate from the US Fed, a chief economist at Amherst Pierpont, Stephen Stanley wrote in a client note, “The August figure is the first reading above 1 million since 2006, so both new and existing home sales registered their best results since 2006 in August.
The level beat expectations by over 100K”. Nonetheless, citing that a rapidly softening labour market coupled with a weakening in US consumer spending had been posing potential downside risk for a “low-supply, highly-priced” US housing market, a lead US economist for Oxford Economics, Nancy Vanden Houten said followed by the release of the Govt.
data, “While strong demand and lower mortgage rates are supportive of further growth in sales, the slow recovery and weak labor market pose downside risks that we expect will weigh on home sales in the months ahead”.