The gold bulls have gained momentum going into the weekend, with Thursday’s Pending Home Sales Index missing economists’ expectations. The latest data, which is published monthly by the National Association of Realtors (NAR), showed a dramatic drop in the number of new home sales being initiated in April.
The decline of 3.9% was much higher than the 1.9% dip that had been forecasted. In addition, the number of pending home sales also fell to 9.1% for the year, putting the real estate sector on the same footing as 10 years ago.
This data is significant because it provides a forward-looking barometer at the health of the property market. Economists see a notable slump as being indicative of a slowdown, given there is typically a couple of months lag between when a consumer begins the process of buying a new property, and when that process is completed.
April’s fall is part of a bigger picture of slowing house sales and marks a sixth consecutive month of losses. This is troublesome as the property market is a barometer of wider economic health – more sales indicates strong consumer confidence while a decline in sales means that confidence is low. A slow down has an impact on the construction sector which in turn has a knock-on impact on economic growth and from there, can contribute to the onset of recession.
The NAR’s chief economist, Lawrence Yun explained the decline saying, “The escalating mortgage rates have bumped up the cost of purchasing a home by more than 25% from a year ago, while steeper home prices are adding another 15% to that figure.
“Pending contracts are telling, as they better reflect the timelier impact from higher mortgage rates than do closings. The latest contract signings mark six consecutive months of declines and are at the slowest pace in nearly a decade.”
In response to this data, gold gained 0.12% on the day, trading at £1,467 ($1,848). Act quickly.
