Economic Preview: Buyer’s market? Not in housing. Sales sag in key tract of U.S. economy

Sales of new and previously owned homes in the U.S. have petered out lately. A blip? Or worse than that?

By all rights home sales in the U.S. should be booming, but they are not.

Oh sure, real estate agents are busy and there’s no shortage of potential buyers. There just aren’t quite enough actual buyers right now in light of how well the economy is doing.

Sales of previously owned homes, for instance, have fallen three straight months. And they are basically flat compared to one year ago.

Similarly, sales of newly built homes have tapered off after reaching a 10-year high in March.

The sales outlook isn’t looking great for September, either. New and existing home sales could fall again, hurt in part by hurricanes that disrupted large swaths of the South, the nation’s fastest growing region. The latest home sales figures are due this week.

“Sales look to have hit a ceiling this year after rising steadily since 2011,” said Sal Guatieri, senior economist at BMO Capital Markets.

The backsliding is a bit of a surprise, especially as optimism among builders spurs them to ramp up construction. The steadily growing U.S. economy is gradually raising incomes and providing the most opportunities in at least a decade for anyone who wants to work. Job openings are near a record high and the 4.2% unemployment rate is close to a 17-year low.

Slower sales aren’t entirely a shock, however.

For one thing, rising prices have put off a lot of buyers. The income of the average American is rising almost 3% a year, government figures show, but the cost of new homes is climbing almost twice as fast. Mortgage rates, though still low, are also moving higher.

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Builders and real-estate agents have also complained for years about more red tape, tighter lending standards and a scarcity of inexpensive lots to build on. Those problems haven’t gone away.

Even if all these roadblocks were lifted, builders now face an even more insurmountable problem. They can’t find enough carpenters, bricklayers and other workers with the skills the need.

“Labor and material shortages are holding construction back, and will continue to do so for some time yet,” economists at Capital Economics wrote.

The holdup in home sales is yet another obstacle preventing the economy from reaching 3% annual growth for the first time since 2005. Faster home sales would certainly help nudge the U.S. toward that goal.

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Until recently the hope was that an increase in the supply of homes for sale would push prices down and make them affordable to more Americans.

Perhaps a bigger supply of homes for sale and a drop in prices could push the industry onto a higher plateau. Or maybe, just maybe, most of the pent-up demand for new housing has been met and the market is finally running out of steam after seven years.

“Like the economy, the housing market is pressing up against late-cycle limits,” Guatieri said.