Pending home sales fell 5.5% in July, a significant decline from the 0.2% gain economists were expecting. Middleburg Communities chief economist and former Fed economist Brad Case joins Wealth! to break down the data and what it signals about the state of the housing market.
"The problem with the owner-occupied market, which is what this morning’s report was about, is that houses are simply too expensive. It’s really, really difficult for somebody to justify putting out that kind of money for an asset whose price really can’t be expected to perform very well going forward, given how much you’re paying for it right now," Case explains.
He notes that falling interest and mortgage rates will drive more home purchases. While the Federal Reserve has indicated it will cut interest rates in September, Case believes that housing market recovery will most likely start in November. However, he argues that easing rates will not solve the bigger issue at hand: "House prices are too high and buyers are leery about buying an asset that may not perform well in value."
Case adds, "The problem can only really be solved by building more housing, not just owner-occupied, but housing in general."
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