Economics is often dubbed the “dismal science,” but even professional economists weren’t pessimistic enough about sales of new homes in July; data released by the Commerce Department on Friday showed that the slow-down was much greater than Bloomberg’s economists saw coming.
According to Bloomberg News, sales of new homes dropped 13.4%, the greatest dip in three years. Of the 74 economists financial giant Bloomberg surveyed prior to the release of the data, none predicted such a plummet.
Most experts agree that the cooling interest among consumers in purchasing new homes is related to the recent rise in mortgage interest rates. It appears that many potential home loan customers have be spooked by the spike, which began in May when the Federal Reserve indicated it would begin easing up on its economic stimulus efforts.
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Bloomberg also reports that, despite last month’s home sales data, major home construction companies such as Toll Brothers remain optimistic about Americans jumping back into the housing market – eventually. Indeed, many experts have been warning all along that the housing recovery will take time and that there may be setbacks along the way.
The recent rise in interest rates appears to have been one such setback, as is the slow pace at which the unemployment rate is dropping. While it’s impossible to predict what the future will hold, it’s probable that the rest of 2013 won’t be a knock-out in terms of new home sales. Until consumers begin to readjust their interest rate expectations, enthusiasm for taking on a new mortgage will likely remain tempered.
Remember, though, that from a historical perspective, mortgage interest rates are still quite low. Additionally, home prices are still depressed in many parts of the country, so there are deals to be had. If the time is right for you to buy a home, consider getting in touch with a mortgage broker before prices rise any more.
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