The US housing market has thrived during the ongoing COVID-19 pandemic.
High rates of coronavirus infection in places like Florida haven’t really hurt residential real estate. In fact, changing lifestyles, such as many white-collar workers working remotely, have helped the housing industry boom in Miami-Dade County, as thousands of people from other areas from across the country have moved here in the past two years.
This week will come the first test for the housing juggernaut to see how it weathers rising interest rates, high inflation and lingering recession worries.
Several economic indicators related to housing must be published. On Tuesday, the US Existing Home Sales report will give investors a read on how spring homebuyers are coping with higher borrowing costs. This May data will be examined for the resilience of demand in the face of higher mortgage rates. It will also reflect how sellers react to rising interest rates.
The June and July home sales reports will reveal more about how the housing market is holding up. The Federal Reserve raised rates again last week – this time by three-quarters of 1%, the biggest hike since 1994.
The average 30-year mortgage rate is now at 5.3% according to Freddie Mac. The rate was close to 3% at the start of the year. This increase adds more than $400 per month to the mortgage payment for a $350,000 home.
On Wednesday, major homebuilder KB Home is expected to release its second-quarter financial results. Homebuilders have been affected by inflation in two ways. First, there have been higher costs of doing business due to more expensive building materials and labor. Second, the Fed’s fight against inflation, with rising interest rates as its main tool.
US new home sales in May on Thursday will give investors a broader sense of consumer appetite and ability to build new homes.
Even if you’re not in the market to buy or sell a home, these reports will provide investors with an update on much of the US economy. Housing and housing services represent approximately 17% of US gross domestic product.
While the stock market is in desperate need of repairs, a healthy housing market could help restore investor confidence.
Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is vice president of news. Twitter: @HudsonsView