By Lucia Mutikani
The sales of Washington (Reuters) of new US unifamilial houses have dropped the most almost three years in May, because high mortgage rates and an increase in economic uncertainty have been undermined, raising the supply of unleashed houses at the highest level since the end of 2007.
On Wednesday, the drop in sales larger than expected by the Commerce Department added to the low construction of houses and lukewarm sales previously possessed last month by suggesting that the accommodation is out of the second quarter after being neutral during the January-March quarter.
The bulge of stocks and the increase in costs due to the prices of President Donald Trump on imported materials, in particular wood, steel and aluminum, limit the capacity of manufacturers to innovate on new housing projects. Manufacturers offer incentives, including price reductions, to attract buyers.
“Although manufacturers’ incentives can prevent a sharp drop in sales of houses on new houses, we see no real sales advantage in the coming months since our mortgage rate forecasts remain high and that the labor market softens,” said Nancy Vanden Houten, American economist at Oxford Economics.
Sales of new houses dropped by 13.7% for an annualized rate of 623,000 units seasonally adjusted by 623,000 units last month, said the Census Office of the Commerce Department. The decrease has been the biggest since June 2022.
The April sales rate was revised at a rate of 722,000 units compared to the 743,000 units previously declared.
Economists interviewed by Reuters had planned sales of new houses, which represent approximately 13.4% of sales of American houses, going at a rate of 693,000 units. Sales of new houses, which are counted at the signing of a contract, are volatile on a basis of months in months and subject to large revisions.
They decreased by 6.3% on an annual basis in May in May. The drop in sales was mainly among the completed houses.
“This trend should continue because manufacturers sell by the current inventory,” said Veronica Clark, economist at Citigroup. “Sales of houses where construction has not yet started remains very low, indicating little future support for the construction of housing.”
Sales last month dropped by 21.0% in the densely populated south. They decreased by 5.4% in the West and dropped 7.1% in the Midwest. But sales soaked 32.1% in the Northeast.
Higher borrowing costs
Mortgage rates have remained high in tandem with yields of the US treasury in the midst of increased economic uncertainty from import rights, which prompted the federal reserve to suspend its cycle of reduction in interest rates. The president of the Fed, Jerome Powell, told legislators on Tuesday that radical prices could start to increase inflation this summer and reiterated that the American central bank was not in a hurry to resume rate cuts.
