US: Lower mortgage rates have finally given home buying a boost – Wells Fargo

New home sales rose 7.1% in August in the US to an annual rate of 713K. Analysts at Wells Fargo point out inventories are falling, which should push prices higher and see that housing is set to contribute to Q3 GDP growth, the first time in more than a year.

Key Quotes: 

“New home sales jumped 7.1% in August and are running 6.4% ahead of their year-ago pace on a year-to-date basis.”

“The improving pace is helping to clear inventories. There were 328,000 homes for sale at the end of August, a 5.7 months’ supply, down from 7.4 in December. With lower inventories, builders are offering fewer discounts, pushing prices higher.”

“Residential investment has dragged on overall GDP growth for six consecutive quarters, but the stronger pace of sales points to a positive contribution in Q3. It should also feed through to stronger construction in coming months.”