Money & The Economy

Lower Interest Rates Are Giving the U.S. Housing Market a Boost

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The Trump Effect strikes again. Donald Trump’s economic policies are giving the U.S. housing market a shot in the arm. In June, Conservative Daily News showed how the U.S. housing market outlook had hit its highest mark in three years. Nationwide senior vice president and chief economist David Berson predicted “another solid year.” His bullish forecast is due to job gains and faster income growth sustaining demands. Additionally slower house price growth is driving property prices down, and that is further contributing to this positive outlook. Not to mention the lower interest rates that are plunging even more.

Yahoo! Finance reports that plunging long-term interest rates are further boosting the U.S. housing market. At 3.6% for an average 30-year mortgage, interest rates are now at low enough levels to stimulate the U.S. housing sector. These levels are the lowest since November 2016 and are expected to lead to an even more robust housing market.

“We do expect lower rates to positively affect housing activity in the quarters ahead. Some leading indicators for housing, such as builder and consumer sentiment, have improved recently,” wrote Credit Suisse in a recent research note. ”We expect an imminent return to moderate but positive growth in the housing market. A recovery in housing is likely to provide a welcome boost to growth amid a global manufacturing slump.”

National Association Realtors chief economist Lawrence Yun is just as bullish about the positive effect of these lowered rates. “We expect the second half of year will be notably better than the first half in terms of home sales, mainly because of lower mortgage rates,” Yun told Yahoo! Finance.

That expected boost, in fact, is already evident across the country. In short, the Trump Effect on the U.S. housing market is starting to be felt. FXCM’s economic calendar shows how new home sales in the U.S. are up, which is a reflection of how the housing market has experienced a boost this year. This reflects a trend across the real estate industry. A USA Today report on the housing market revealed that home sales in July rose by 2.5% — from 5.29 million units in June to 5.42 million units in July. This increase is a clear indication that lower mortgage rates are, indeed, increasing the number of homes that are being bought. With lower rates expected, the increases in sales will likely increase throughout the rest of 2019.

Of course, it isn’t surprising that the U.S. housing market is enjoying a transformation. The home price boom of 2017 was an indication of this upward trend. Back then house prices were driven up by the Trump economic recovery. In particular, rising employment gave way to increased demand, which in turn caused the spike in prices. Now, two years later, the economy remains strong, and demand continues to be high. Home prices, however, have undergone a price correction and are starting to become more affordable. Moreover, purchasing power is increasing, while interest rates are being lowered. These circumstances taken together are likely to boost the U.S. housing market even more in the coming months.

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Carl Fox

Carl Fox is the senior money and finance writer for Conservative Daily News. Follow him in the "Money & The Economy" section at CDN and see his posts on the "Junior Economists" Facebook page.

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