US house prices cool

The resale values of existing homes fell for the first time in 11 years in the USA. At the same time the number of unsold houses on the market was the highest since current measures were put in place. The figures fully underlining concerns that the USA may be moving into a housing slump – and hence a potential recession.

The sales of existing homes slowed down to 6.30 million units in August 12.6 percent down on the year.

The Federal Reserve has recently justified its pause in interest rate rises by saying that weakness in the housing sector will put the brakes on growth and help slow down inflation. The latest numbers suggest that the central bank may soon start lowering rates.

Housing inventory levels rose 1.5 per cent to a 7.5 month supply at the current sales pace, compared with 6.3 months in July, and 4.7 months at this time last year. The inventory was at its highest since since condominiums were added to the survey in 1999.

While much has been made of the slow down in ‘starts’ it should be remembered that existing homes make up about 85 percent of the total market.

So it seems that the population has either run out of steam, or a combination of interest rate hikes and gas pump sticker shock has slowed down the pursuit of the American dream for a while.

Meanwhile across the water in Australia and in the other direction in the UK it seems that both countries will need a bigger short sharp shock to get the housing market to follow the US.

The Fed is now less likely to increase rates as the consumer boom, oil prices and house prices all seem to be cooling off rapidly.