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Poll: Trade War with China to Impact Housing Market

A report from Reuters [1] reveals that the trade war between the U.S. and China may stop some of the growth of the U.S. housing market from additional interest rate cuts by the Federal Reserve, including just a modest outlook for price increases. 

The report states that the current estimate of a 3% increase for residential property across the nation is the weakest since the polling began in February 2017. Property prices, however, are still expected to outpace inflation, but the shift suggest “no meaningful contribution to growth” from housing. 

Of the 40 property analysts included in the poll, the majority said home prices will rise 3% in 2019, 3.2% in 2020, and 3.3% in 2021. Seventy-percent of analysts also said their “already-modest housing market outlook was skewed more to the downside.” 

“The problem is that overall sentiment is starting to show some signs of weakness … so the fear is that issues outside the housing market are preventing a stronger recovery than otherwise would have been without the trade war,” said Brett Ryan, Senior U.S. Economist at Deutsche Bank in New York.

The poll also found that two-thirds of analysts in the survey said the trade dispute will damage housing activity, 10 said it would have no impact, and two said it would help. 

Activity in the housing market has been a mixed bag over the past few weeks. 

The National Association of Realtors reported a 2.5% increase in existing-home sales [2]for July, but the U.S. Census Bureau revealed the sales of new, single-family homes dropped 12.8% [3] for the month. 

“As summer temperatures rose homebuyers moved to cooler vacation spots for some respite. Even with mortgage rates below 4%, new home sales declined in July, to a pace of 635,000 units, down 12.8% from June … While consumer optimism remained upbeat and resulted in higher retail spending, the prospect of continuing low mortgage rates has removed the sense of urgency for buyers of new homes,” said George Ratiu, Senior Economist at realtor.com. 

Also, CoreLogic reported that May was the 14th-consecutive month of waning price growth. [4] Home prices for the month rose 3.4%.