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August Pending Homes Sales
More Americans signed contracts to buy homes in August, which is a likely signal that low mortgage rates from the last few months may have jumpstarted a turnaround for the national housing market, led by our home region the West. Both new- and existing-home-sales rebounded in the published August data, leading economists’ expectations that pending sales would also rebound. Pending home sales came through rising 1.6% month over month, better than the 1.0% expected forecast. Year-over-year contract signings jumped 2.48%. This gain is the biggest annual jump since April 2016. Pending home sales, which reflect purchases that are usually completed a month or two later. Each of the four major regions reported both month-over-month growth and year-over-year gains in contract activity with the highest increase in the West region, Denver’s home region.
Lower mortgage borrowing costs have been slowly boosting buyer demand. Persistently high prices across the country, driven up by a tight inventory supply of available homes since the financial crisis, had previously weakened the benefits of low mortgage rates. Demand has been up and done over the past few months as home prices have risen, with contract activity dipping last month in July.
Pending Sales Regional Breakdown
The Northeast rose 1.4%, while it fell in July by 1.6%. Year-over-year the Northeast is now 0.7% higher than a year ago.
The Midwest rose 0.6% while it fell in July by 2.4%. Year-over-year the Northeast is now 0.2% higher than a year ago. The Midwest had the slowest annual growth of all the US regions.
The South rose 1.4% while it fell in July fell by 2.4% Year-over-year the South is now 1.8% higher than a year ago.
The West rose 3.1% while it fell in July fell by 3.4%. Home prices in our home region are still on fire, and year-over-year the West is now 1.8% higher than a year ago.
What Does This Blog Say About The Future Of The Denver Housing Bubble
Our biggest question is, what happens next? As mortgage rates have rebounded higher from generational lows and recent mortgage applications have already crashed since this sales data has been released, we see lower price gains going into 2020. Our permabull friend, Dr. Larry felts differently,
“It is very encouraging that buyers are responding to exceptionally low interest rates,” said Lawrence Yun, NAR chief economist. “The notable sales slump in the West region over recent years appears to be over. Rising demand will reaccelerate home price appreciation in the absence of more supply.” “With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020,” said Yun. “Unfortunately, so far in 2019, new home construction is down 2.0%. The hope is that housing starts to quickly move into higher gear to meet the higher demand. Moreover, broader economic growth will strengthen from increased housing activity.”
The National Association of Realtors® is forecasting home sales to rise by 0.6% in 2019 and another 3.4% in 2020. Housing starts are predicted to increase by 2.0% in 2019 and jump an additional 10.6% in 2020, which in turn raises GDP to growth at 2.0% in 2020. We see the metro Denver housing bubble growing at a lower rate than NAR next year, between 1% to 2%.