US housing recovery sputters

America's two-year housing market rebound appears to be running out of steam.

The American housing market rebound seems to be running out of steam after a hefty two-year bounce. Sales of new single-family houses are down 4.2% year-on-year, while sales of previously owned dwellings are down 7%.

One problem is that a rapid bounce-back in prices has put off potential buyers, while mortgage interest rates have jumped, undermining enthusiasm among consumers already grappling with weak wage growth.Thirty-year mortgage rates are 1% up on last spring.

What's more, credit is still being rationed. Mortgage financing remains "extremely tight", says Ellen Zentner of Morgan Stanley, and builders are also having trouble getting loans.

Highly indebted young people now often choose to save money by living with their parents, further crimping demand. And investors such as hedge funds, who have helped drive the recovery, have stopped buying-to-let as prices have risen and fewer distressed houses come onto the market.

It's far too early to conclude that the housing recovery is off. But its tentative nature means that housing may not make the contribution to overall growth via construction and making consumers feel wealthier that many had hoped in the next few years. It's just another facet of America's sub-par recovery.

Recommended

Why Wall Street has got the US economy wrong again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
Central banks want politicians to take charge – but what will they do?
US Economy

Central banks want politicians to take charge – but what will they do?

The US Federal Reserve has come to the end of the road in terms of what it can do to accelerate any recovery, says John Stepek. It's over to the polit…
17 Sep 2020
Two funds that will help ensure a brighter outlook for care homes
Investment trusts

Two funds that will help ensure a brighter outlook for care homes

Two listed real-estate investment trusts in the care-home sector look attractively valued and offer a decent income too, says Max King.
15 Sep 2020
The stamp-duty stampede
Personal finance

The stamp-duty stampede

There has been a surge in people wanting to move house before the stamp duty holiday ends next year.
11 Sep 2020

Most Popular

Here’s why you really should own at least some bitcoin
Bitcoin

Here’s why you really should own at least some bitcoin

While bitcoin is having a quiet year – at least in relative terms – its potential to become the default cash system for the internet is undiminished, …
16 Sep 2020
Will a second wave of Covid lead to another stockmarket crash?
Stockmarkets

Will a second wave of Covid lead to another stockmarket crash?

Can we expect to see another lockdown like in March, and what will that mean for your money? John Stepek explains.
18 Sep 2020
James Ferguson: How bad data is driving fear of a second wave of Covid-19
UK Economy

James Ferguson: How bad data is driving fear of a second wave of Covid-19

Merryn and John talk to MoneyWeek regular James Ferguson about the rise in infections in coronavirus and what the data is really telling us.
17 Sep 2020