The housing should foster stronger economic growth – Wells Fargo
On Wednesday, the report on Existing Home Sales in the US showed a 3.6% increase in December. According to analysts at Wells Fargo, lower mortgage rates have brought buyers back out, but they warn inventories remain thin.
“Preliminary data show existing home sales for 2019 totaling 5.34 million units, which is even with their 2018 level but is slightly below our forecast for the year. We are expecting sales to rise 1.4% in 2020 to 5.435 million units but we will need to see more sellers to hit that level. The number of existing homes for sale at the end of December fell 14.6% from the prior month and is down 8.5% from last December. At the current sales pace, there is just a 3.0 months’ supply of homes available for sale.”
EUR/USD is trading around 1.0850, above the lowest since April 2017. The US Control Group disappointed by staying flat in January. Consumer sentiment beat expectations. Germany reported a 0% growth in Q4 2019.
“Sales of existing homes rose a solid 3.6% in December to a 5.54 million-unit pace, which is the strongest since February 2018. Lower mortgage rates have brought buyers back into the market, particularly in the South and West, where population and employment growth remain exceptionally strong. The strength in existing home sales follows a string of positive housing reports and should offset some of the drag being exerted on the economy from sluggish global economic growth.”
“The December data are consistent with the pending home sales data, which had risen solidly in previous months. Existing home sales reflect closings, while pending home sales reflect purchase contracts. Most of the leading indicators of home sales suggest that the positive momentum should carry over into 2020. Mortgage applications for the purchase of a home have risen solidly so far this year, consumer confidence remains high and household balance sheets are in solid shape.”
GBP/USD is trading closer to 1.30, consolidating its gains after UK PM Johnson nominated Sunak as Chancellor instead of Javid, potentially directing fiscal stimulus. Brexit concerns and coronavirus developments are in play.
Consumers kept to their habits boosting purchases last month but the holiday season was slower than its initial reading giving the New Year a soft beginning.
The barrel of West Texas Intermediate (WTI) fell below the $51 handle on Thursday but recovered a large portion of its losses to close the day at $51.50 on easing concerns over the impact of the coronavirus outbreak on the global energy demand.
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