US: Lower mortgage rates to support the steadily improving trend in new home sales – Wells Fargo

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Today’s New Home Sales report showed that in May sales dropped 7.8%.  Despite the monthly decline, lower mortgage rates and builder discounts have led to an overall improving trend and sales are up 4.0% on a year-to-date basis, explained analysts at Wells Fargo. 

Key Quotes: 

“Despite sliding mortgage rates and a pickup in purchase application activity, new home sales plunged 7.8% during May. That noted, the pace of new home sales remains solid and May’s weak report overshadows an improving overall trend. Sales are running at a 670,000 unit pace over the past three months, well ahead of the 615,000 unit pace averaged throughout 2018.”

“Through the volatility, sales are still up a solid 4.0% on a year-todate basis. We expect lower mortgage rates to continue to support the steadily improving trend in new home sales in coming months, however a surge in activity is unlikely.”

“The median home price fell 2.7% year-over-year to $308,000. Lower new home prices compared to last year reflect steep discounts offered by builders, which has helped bring down rapidly rising inventories.”

“Home price appreciation continues to soften. Reported separately, the S&P CoreLogic Case-Shiller National Home Price Index (HPI) increased 3.5% in April, a slower pace than both the 3.7% rise during March and 6.5% registered during the same month last year. The 20-City Composite Index also showed price appreciation across the country was flat during the month and eased 2.5% over the year. A sharp 0.6% monthly decline in Seattle likely weighed on the topline index, however 16 of the 20 covered markets posted gains during April.”

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