Sales increase in the United States, driven by lower mortgage rates

WASHINGTON (Reuters) – US home sales grew more than expected in July, boosted by lower mortgage rates and the strength of the labor market, signaling the Federal Reserve's decision to cut back on mortgage sales. interest rate supported the economy.

A separate report released Wednesday by the Ministry of Labor suggests that the level of employment in the country was slightly lower than previous estimates, which would have somewhat spoiled the labor market.

Despite the global economic slowdown, the housing market in the United States appears to be strengthening.

The National Association of Realtors said that existing home sales had increased 2.5%, reaching a seasonally adjusted annual rate of 5.42 million units last month. The pace of June sales was slightly revised upward from 5.27 million units to 5.29 million units.

Economists polled by Reuters had predicted that existing home sales would reach 5.39 million units in July.

Data from the housing sector had little impact on equity prices, which rose after the good results of Lowe's Cos Inc retailers (LOW.N) and Target Corp (TGT.N) strengthening confidence in consumer demand.

CUTTING RATES

The increase last month left existing home sales, which account for about 90% of US home sales, up from the previous year for the first time in 17 months. The US domestic market fell into the rut last year, as the US central bank continued its rate hike campaign.

After raising rates in December, the Fed announced that the tightening had been put in place. In July, the central bank completely changed course, cutting rates for the first time since 2008 to prevent a global slowdown from causing a recession in the United States.

The rate cut came as the unemployment rate in the United States was at its lowest level in almost 50 years. The Ministry of Labor reported Wednesday that the overall level of employment was 0.3% lower in March, 501,000 fewer jobs than expected.

This preliminary estimate will be refined and integrated early next year into the Department of Labor's estimates of job gains through 2019, which have been robust although on average slower than in 2018.

Last month, sales of existing homes increased across the country, with the exception of the northeast, the NAR announced.

The 30-year fixed mortgage rate fell to an average of 3.77 percent in July, after peaking at 4.94 percent in November, after peaking in seven years, according to data from mortgage lender Freddie. Mac. The average rate fell to 3.6% the week of August 15 and rates could fall further as the Fed is expected to lower rates in September due to concerns about a weakening economy.

There were 1.89 million previously owned homes on the market in July, down from 1.92 million in June and down 1.6% from July 2018. The median price of existing dwellings increased 4.3% over last year to settle at $ 280,800 in July.

In the context of tight inventories and a persistent rise in home prices relative to consumer goods, the recent sales increase "is probably not the beginning of a sustained upward trend said Matthew Pointon, economist at Capital Economics.

In July, it would take 4.2 months to deplete the current stock, against 4.4 months in June. An offer of six to seven months is considered a good balance between supply and demand.