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Thread: What is the effect of the increase in existing US home sales?

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    Default What is the effect of the increase in existing US home sales?

    This indicator is of great importance in economic reports as US home sales increased at the highest-ever pace in June, supported by a historical decline in interest rates on mortgages, but the housing market is shrouded in uncertainty due to supply shortages and high unemployment in light of the Covid-19 pandemic. The June increase ends a three-month losing streak, but home resale remained below the pandemic. Existing home sales, which make up about 85 percent of US home sales, fell 11.3 percent year-on-year in June.

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    Existing home sales, as reported by the National Association of Realtors (NAR), fell for the third straight month in May as the coronavirus pandemic shut down much of the country's economic activity and hit the labor market.


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    I think its due to the economic support that the government offered due to the COVID-19 pandemic, reduced interest rates and a slight decline in house prices due to the uncertainty due to COVID-19. People now have more money to spend, thanks to the massive government support. The idea behind that was to help circulate more money within the economy so that businesses can stay afloat and same can be seen in house sales.

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    Its not just USA where this has happened but I think it is also happening in other developed countries where Governments gave economic support to their people. The same effect can be seen in consumer spending in Australia which went up since the start of the pandemic. The lower interest rates on home loans also push this narrative of buying a new house even for the ones who can't actually afford in the longer run.

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    Quote Originally Posted by MajdHomsi     
    This indicator is of great importance in economic reports as US home sales increased at the highest-ever pace in June, supported by a historical decline in interest rates on mortgages, but the housing market is shrouded in uncertainty due to supply shortages and high unemployment in light of the Covid-19 pandemic. The June increase ends a three-month losing streak, but home resale remained below the pandemic. Existing home sales, which make up about 85 percent of US home sales, fell 11.3 percent year-on-year in June.





    Existing home sales, as reported by the National Association of Realtors (NAR), fell for the third straight month in May as the coronavirus pandemic shut down much of the country's economic activity and hit the labor market

    Though trading on financial markets involves high risk, it can still generate extra income in case you apply the right approach. By choosing a reliable broker such as InstaForex you get access to the international financial markets and open your way towards financial independence. You can sign up here.


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    Default What is the effect of the increase in existing US home sales?

    WASHINGTON (Reuters) - U.S. home sales increased more than expected in October and house prices rose at the fastest pace in more than two years amid lower mortgage rates and a shortage of properties for sale.

    The National Association of Realtors said on Thursday that existing home sales rose 1.9% to a seasonally adjusted annual rate of 5.46 million units last month. September's sales pace was downwardly revised to 5.36 million units.

    Economists polled by Reuters had forecast existing home sales rising 1.4% to 5.47 million units.

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    The U.S. Federal Reserve has cut interest rates three times this year, which has bolstered the housing market by lowering mortgage rates.

    Last week, Fed Chair Jerome Powell reiterated that he and his colleagues see a "sustained expansion" ahead as likely for the country's economy, with the full impact of recent interest rate cuts still to be felt and low unemployment boosting household spending.

    The central bank's reduction in borrowing costs has caused the 30-year fixed mortgage rate to drop more than 130 basis points since last November's peak to an average of 3.66%, according to data from mortgage finance agency ****die Mac.

    Other factors continue to weigh on housing though, including a chronic lack of properties for sale, which has inflated prices and kept many buyers on the sidelines.

    There were 1.77 million homes in the market last month, a decline of 4.3% compared to a year ago.

    In a more positive sign, data on Tuesday showed U.S. homebuilding rebounded in October and permits for future home construction jumped to a more than 12-year high.

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    Part of the reason for this is the stimulus package from the Trump Government. It was so massive that so many people just received cash while staying at home. In addition, some of the data suggests that its due to the all time low interest rates so people who even have a little saving are jumping in to buy a house just because they think they can do it with such lower interest rates.

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    I think people aren't taking into account their full circumstances and just getting in to the market by buying new houses without thinking about the uncertainty and the risk associated with this. People's jobs are at stake and this could be a risky situation if people keep buying like this. We all remember what happened during the GFC crises. Easy credit to buy homes was one of the major reasons for that crisis.

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    Quote Originally Posted by Oriana     
    I think people aren't taking into account their full circumstances and just getting in to the market by buying new houses without thinking about the uncertainty and the risk associated with this. People's jobs are at stake and this could be a risky situation if people keep buying like this. We all remember what happened during the GFC crises. Easy credit to buy homes was one of the major reasons for that crisis.
    This is actually the problem with long term mortgages. Most people opt for 30 years mortgage which have massive compounded interests plus a very long payout duration of 30 years. Its such a long time and things can go up and down in between this period at least a few times. We saw this during 2008 GFC and now also again during the pandemic where there is economic uncertainty. I think home buyers should keep this in mind and properly plan before buying to avoid an economic fallout.

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    Quote Originally Posted by Dinara     
    This is actually the problem with long term mortgages. Most people opt for 30 years mortgage which have massive compounded interests plus a very long payout duration of 30 years. Its such a long time and things can go up and down in between this period at least a few times. We saw this during 2008 GFC and now also again during the pandemic where there is economic uncertainty. I think home buyers should keep this in mind and properly plan before buying to avoid an economic fallout.
    You are really spot on. I was looking at 30 year mortgages and realized that in the initial few years, whatever our repayments are, almost 70-80% goes just towards the interest because its compounded. So in other words, the first 5-6 years is just like paying interest and only a small amount of principal. Its after this time is when the principal starts getting paid. One such crisis like the 2008 can cause havoc on the housing market where people are deeply in debts.

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