The Home Buyer's Korner

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August 24th, 2015

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Existing Home Sales for July 2015

Homes Sales

Sales of previously owned home climbed in July to their pre-recession levels, but we still face low inventory and higher prices are surely going to threaten and future gains as we head into the fall.

Existing-home sales rose 2 percent last month from June to a seasonally adjusted rate of 5.59 million, as reported by the National Association of Realtors last Thursday and the sales pace was the highest since February 2007 and 10.3 percent higher than a year earlier.

Despite relatively steady gains in home sales over the past year, diminishing supply and high prices loom heavy and could slow the housing recovery. Additionally, mortgage rates could begin to rise in September if the Federal Reserve raises short-term interest rates, but recent news from the world economy and today’s 1000 drop in the stock market should cause the Feds to seriously consider any rate hike.

Total housing inventory fell 0.4 percent at the end of July to 2.24 million existing homes available for sale and that’s down year over year by 4.7 percent. At the current pace of sales it would take 4.8 months to exhaust the supply of homes on the market, down from 5.6 months a year ago. Keep in mind most housing economist believe a healthy balance is a six month supply. We have a broad-based housing shortage and Home builders have basically out of the game or under producing since the crash.

The median sale price for a previously owned home slipped slightly to $234,000 from June’s $236,300, but is still 5.6 percent higher than a year earlier. July’s prices mark the 41st straight month of year-over-year price gains.

This combination of rising prices and thin supply has left some prospective buyers on the sidelines, especially as rising rents eat up a larger portion of incomes, making it harder to save for a down payment.

First-time buyers declined to 28 percent of all buyers, the lowest share since January and for a truly healthy housing market we need at least 40 percent of all homes sold to be going to first time home buyers and for now sales are being driven largely by buyers who already own homes. The market dynamics have also given an edge to existing homeowners, who can tap into rising home equity as their own properties appreciate. Most home sales this year have been move-up buyers, as a lot of those people got trapped when the market crashed and they’re finally starting to get some equity in their homes.

According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage rose in July to 4.05 percent from 3.98 percent in June, but dropped under 4 percent in recent weeks. Mortgage rates are still low by historical standards, but could rise in the fall if the central bank raises interest rates.

Figures this week on housing starts indicate that some new inventory will eventually make its way onto the market.

U.S. housing starts rose 0.2 percent in July to a seasonally adjusted annual rate of 1.21 million, the highest since October 2007. That is the third time in four months the figures reached a new high since the recession began.

Thursday’s existing-home report showed that July’s gains were driven by sales in the single-family segment, which rose by 2.7 percent. Condo and co-op sales fell by 3.1 percent. Prices in both categories rose on a non-seasonally adjusted base, with single-family home prices jumping 5.8 percent and condo prices rising 3.2 percent.

Sales performance also differed by region. Home sales rose in the South and West, but fell in the Northeast and stayed flat in the Midwest.

The regional differences in labor markets have contributed to divergent housing market performance. “Western states, such as California, have generally been the epicenter of both housing activity and job growth over the past year thanks to the job growth in higher-wage sectors, such as technology, health care and finance.

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