WASHINGTON: Americans stepped up their home-buying for a third straight month in July, as sales accelerated to the strongest pace in eight years.
The National Association of Realtors said that sales of existing homes rose two percent last month to a seasonally adjusted annual rate of 5.59 million, the fastest rate since February 2007. Sales have jumped 9.6 percent over the past 12 months, while the number of listings has declined 4.7 percent.
Steady job growth and relatively low mortgage rates have convinced current homeowners to purchase homes, while first-time buyers remain scarce. The housing market contains a mere 4.8 months’ supply of homes, meaning that prices are rising for an increasingly narrow set of properties.
The slow six-year recovery from the Great Recession has finally revitalised the housing market. Home sales have soared in recent months, as more current homeowners have returned to the real estate market for an upgrade or to downsize as they approach retirement. Yet the upswing also reflects increasing problems with affordability that have left first-time buyer on the sidelines.
“When first-time homebuyers compete with people who are more qualified borrowers that have additional cash, they tend to lose,” said Budge Huskey, chief executive of the real estate brokerage Coldwell Banker.
The median home price climbed 5.6 percent over the past 12 months to $234,000. Just 28 percent of the purchases last month went to first-time homebuyers, a group that historically accounted for 40 percent of sales. A more balanced market would contain six months’ of supply — instead of less than five — and provide potential homebuyers with a greater selection of homes.
Current homeowners with equity have been able to absorb some of that price appreciation as they’ve shopped for another home. But the recent sales explosion also reflects two critical factors: the economy adding a solid 2.9 million jobs over the past 12 months and the average, 30-year fixed mortgage rate staying around four percent. At roughly two percentage points below the historical level, mortgage rates have reduced monthly borrowing costs for buyers.
Still, the trajectory of mortgage rates — and sales — going forward is unclear. It’s possible that a weakening global economy will cause more investors to buy US Treasury bonds.
AP
