Posted via my California Association of Realtors:
July 29, 2024 – The economy expanded at a faster pace than expected in Q2, but the latest growth rate could be the highest we will see in the next few quarters. There are signs in recent months that suggest consumers are increasingly tapped out and could pull back further in coming months. An economic slowdown, however, is not necessarily bad news for the housing market. Mortgage rates, in fact, started this week at six-month lows, as the market has become more convinced that the Fed’s rate cuts will begin in September. Home sales should begin to bounce back and improve more consistently in Q3 and Q4.
US economy surprises with strong growth pace in second quarter: After dropping to the slowest growth pace in Q1 2024 since mid-2022, the U.S. economy bounced back with a stronger-than expected growth rate in the Q2 as consumer spending expanded at a faster clip and business investment continued to rise. Real growth domestic product (GDP) – a measure of economic output – increased at an annualized rate of 2.8% in Q2 2024, well above the 1.4% growth rate recorded in Q1 and exceeded the 2.0% expected by economists. Consumer spending remained the major driving force for the increase, with personal consumption expenditures rising 2.3% on an annualized basis. Business fixed investment also helped fuel the overall economic growth, as intellectual property spending increased 4.5% and equipment surged 11.6%. An increase in households’ income and an improvement in business leaders’ optimism on the economy, in general, were the contributing factors for the solid gain in the overall economic activity.
June retail sales come in flat but avoid a decline expected by economists: While consumers spending stalled in June, the latest reading was actually better than the 0.3% decline expected by economists. Retail sales last month were unchanged from the prior month but increased 2.3% year-over-year. Softness in gas prices and the auto sector was the primary factor for the decline, but weaknesses in new home sales, building materials and home furnishing also contributed to the drop in retail spending. Retail businesses that are tied to the housing sector have been struggling but could see some improvement in coming months if rates begin to slow more consistently. Recent uptakes in revolving credit, however, suggest that households may have begun to exhaust their borrowing capacity and consumer spending could slow further in the third quarter if the jobs market continues to moderate.
New home sales hit 7-month low: Sales of newly constructed homes in the U.S. unexpected dropped for the second consecutive month in June by 0.6% month-over-month and 7.4% year-over-year to 617,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. Sales of new single-family homes in June came in well below the consensus expectation of 640,000 and reached the largest level since November 2023. In recent months, new home sales lost their momentum built up earlier this year, as more existing homes became available and mortgage rates failed to come down more consistently in June. On the supply side, the number of for-sale properties climbed again for the third straight month with new home inventory rising to 476,000 units in June, an increase of 0.8% from the prior month and 11.2% from the same month in 2023. New home inventories rose to 9.3 months and continued to apply some downward pressure on new home prices as the median price slipped 0.1% from a year ago to $417,300.
Homes purchased by international buyers dropped to lowest level since 2009: Between April 2023 to March 2024, international buyers bought $42 billion worth of residential properties in the U.S., a decline of 21.2% from the same time from in the prior year, according to a new report from the National Association of Realtors®. The 54,300 existing homes sold to foreign buyers was a dip of 36% from the year before, and it was the lowest level recorded since NAR started tracking in 2009. Higher costs of borrowing, coupled with a strong U.S. dollar, made U.S. homes more expensive to foreign buyers and resulted in a pullback in the desire to home purchases in the states from international buyers. The median existing home sales price of $475,000 recorded in the latest report increased 19.8% from the prior year and was the highest ever recorded by NAR. Canada led all countries of origin in the share of international buyer purchases of total existing homes in the U.S. at 13%, followed by China (11%) and Mexico (11%). Florida remained the top destination for foreign buyers for the 16th consecutive year, accounting for 20% of all international purchases. Texas (13%) came in second and California (11%) came in third.
Profit margins for home sellers mostly unchanged: Returns on U.S. home sales remained steady in Q2 2024, with the profit margin of typical home sales increasing slightly by one percentage point to 55.8% from Q1 2024 but remaining down by one percentage point from Q2 2023, according to ATTOM. While the raw profits in dollar term went up to $130,000, the properties’ return did not move much because median values have been rising consistently at about the same percentage between the time when properties were purchased and the time when properties were sold. Profit margins were up for Q1 2024 to Q2 2024 in 94 of the 160 metropolitan statistical areas (MSA) around the U.S. but were down annually in 100 of those metros.
You may need to read it twice as it's a lot of info.
But, I felt it was worth sharing in it's entirety.
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