Customers ride the escalator at a J.C. Penney store in New York August 14, 2013.
Credit: Reuters/Brendan McDermidView the original article here
Customers ride the escalator at a J.C. Penney store in New York August 14, 2013.
Credit: Reuters/Brendan McDermidView the original article here
WASHINGTON (Reuters) - Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high and suggesting rising mortgage rates were starting to dampen home sales.
The National Association of Realtors said on Monday its Pending Homes Sales Index, based on contracts signed last month, decreased 0.4 percent to 110.9. May's index was revised down to 111.3, the highest since December 2006, from a previously reported 112.3.
Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to fall 1.0 percent.
Compared to last year, contracts were up 10.9 percent.
Stocks and bonds mostly ignored the report, but the dollar trimmed earlier losses against the yen.
The housing market has been a bright spot in the economy, providing a buffer from fiscal austerity in Washington. Existing home sales fell in June, but selling prices hit a five-year high in a sign the housing recovery was still on track. In addition, new home sales rose last month.
However, an index from the Mortgage Bankers Association that measures loan applications for home purchases has declined 10 percent since early May, a sign of the toll higher borrowing costs are starting to take.
"Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June," said NAR chief economist Lawrence Yun. "The persistent lack of inventory also is contributing to lower contract signings."
Rates on 30-year fixed rate mortgages have climbed about a full percentage point since early May on expectations the U.S. Federal Reserve may begin scaling back its bond-buying stimulus program as early as September.
"We had such an outsize gain in May and I think what we saw was a good number of people that were trying to beat the punch and pull the trigger on buying that home before mortgage rates rose even further," said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina.
Contracts were up in the West, where they reached the highest level since November 2009, but down in the Midwest and South. The index for the Northeast was unchanged.
(Reporting by Paige Gance; Editing by Andrea Ricci)
The National Association of Realtors said Monday that its seasonally adjusted index for pending home sales ticked down 0.4 percent to 110.9 in June. The May reading was revised lower by a percentage point to 111.3, but it was still the highest since December 2006.
The slight decline suggests higher mortgage rates may be starting to slow sales. Still, signed contracts are 10.9 percent higher than they were a year ago. There is generally a one- to two-month lag between a signed contract and a completed sale.
Economists were relieved after seeing only a modest decline. They said that shows higher mortgage rates are having only a small impact on the home sales market.
"All told ... pending home sales held up fantastically well," Dan Greenhaus, chief global strategist at BTIG, an institutional brokerage, said in a note to clients.
The average rate on a 30-year fixed mortgage has jumped a full percentage point since early May and reached a two-year high of 4.51 percent in late June.
Rates surged after Chairman Ben Bernanke said the Federal Reserve could slow its bond-buying program later this year if the economy continues to improve. The Fed's bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.
In recent weeks, Bernanke and other Fed members have stressed that any change in the bond-buying program will depend on the economy's health, not a set calendar date.
Since those comments, interest rates have declined. The average on the 30-year mortgage was 4.31 percent last week.
Even with higher mortgage rates, signed contracts increased in the West last month. They were unchanged in the Northeast and fell in the South and Midwest.
Home sales and prices have climbed since early last year, buoyed by solid hiring and historically low mortgage rates. Housing has been an important driver of economic growth this year as other parts of the economy have languished, such as manufacturing and business investment.
Sales of previously occupied homes slipped last month, after a big rise in May to the highest level in 3 ½ years.
But new-home sales jumped in June to the fastest pace in five years, boosting confidence that the housing recovery is strengthening.
(Credit: Bryan Mitchell/AP Photo)Retail sales fell by 0.4 percent in March, according to the Commerce Department, the biggest drop in nine months. The major stock market indexes slid on the news.
Taxes went up at the beginning of the year for everyone who gets a paycheck and that may finally be affecting consumers’ ability to spend. Consumer spending, which makes up two-thirds of U.S. economic activity, is a major barometer of the strength of the economy.
This report was not entirely unexpected as the March jobs report showed a drop in retail employment. It was also a colder than usual March in much of the country and the early Easter holiday may have had an impact on spending.
There were, however, two bright spots in the report. First was a rise in spending at restaurants as Americans may have diverted some cash to eat out more. Spending on furniture also rose, the result of an improving housing market.
On the whole, today’s report doesn’t bode well for the economy. As economist Joel Naroff explained it in a note, “first quarter growth should be decent, but decent is not good enough nearly four years after the end of the recession.”
The Dow Jones industrial average fell 42 points to 14,822 at 11:20 a.m. ET.
WASHINGTON (Reuters) - Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high and suggesting rising mortgage rates were starting to dampen home sales.
The National Association of Realtors said on Monday its Pending Homes Sales Index, based on contracts signed last month, decreased 0.4 percent to 110.9. May's index was revised down to 111.3, the highest since December 2006, from a previously reported 112.3.
Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to fall 1.0 percent.
Compared to last year, contracts were up 10.9 percent.
Stocks and bonds mostly ignored the report, but the dollar trimmed earlier losses against the yen.
The housing market has been a bright spot in the economy, providing a buffer from fiscal austerity in Washington. Existing home sales fell in June, but selling prices hit a five-year high in a sign the housing recovery was still on track. In addition, new home sales rose last month.
However, an index from the Mortgage Bankers Association that measures loan applications for home purchases has declined 10 percent since early May, a sign of the toll higher borrowing costs are starting to take.
"Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June," said NAR chief economist Lawrence Yun. "The persistent lack of inventory also is contributing to lower contract signings."
Rates on 30-year fixed rate mortgages have climbed about a full percentage point since early May on expectations the U.S. Federal Reserve may begin scaling back its bond-buying stimulus program as early as September.
"We had such an outsize gain in May and I think what we saw was a good number of people that were trying to beat the punch and pull the trigger on buying that home before mortgage rates rose even further," said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina.
Contracts were up in the West, where they reached the highest level since November 2009, but down in the Midwest and South. The index for the Northeast was unchanged.
(Reporting by Paige Gance; Editing by Andrea Ricci)
(Credit: Bryan Mitchell/AP Photo)Retail sales fell by 0.4 percent in March, according to the Commerce Department, the biggest drop in nine months. The major stock market indexes slid on the news.
Taxes went up at the beginning of the year for everyone who gets a paycheck and that may finally be affecting consumers’ ability to spend. Consumer spending, which makes up two-thirds of U.S. economic activity, is a major barometer of the strength of the economy.
This report was not entirely unexpected as the March jobs report showed a drop in retail employment. It was also a colder than usual March in much of the country and the early Easter holiday may have had an impact on spending.
There were, however, two bright spots in the report. First was a rise in spending at restaurants as Americans may have diverted some cash to eat out more. Spending on furniture also rose, the result of an improving housing market.
On the whole, today’s report doesn’t bode well for the economy. As economist Joel Naroff explained it in a note, “first quarter growth should be decent, but decent is not good enough nearly four years after the end of the recession.”
The Dow Jones industrial average fell 42 points to 14,822 at 11:20 a.m. ET.
