Sales of existing homes are on the riseDate posted: 5/15/14 09:30:00 AM
Completed transactions for existing single-family homes, condos and townhomes have surged for four straight months, pushing the sales pace to the highest of the year, according to a report from the National Association of Realtors.
Total existing-home sales jumped 2.4 percent from June to July to a seasonally adjusted rate of 5.15 million. Although that marks the highest rate of sales so far in 2014, sales are still 4.3 percent below July 2013 - the peak of that year - when the figure hit 5.38 million.
Lawrence Yun, chief economist of NAR, said employment growth and and a surge in existing inventory have helped boost sales throughout the country.
"The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market," Yun said. "More people are buying homes compared to earlier in the year and this trend should continue with interest rates remaining low and apartment rents on the rise."
After 2014 sales opened slowly behind rising mortgage rates and fierce winter weather, Forbes reported that the increase in July sales is a positive announcement for the housing industry. But Yun is asking American homebuyers to pump the brakes regarding any overconfidence. He expects affordability to drop in the next few years.
"Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy," Yun said.
Existing-home prices increased 4.9 from July 2013 to last month, rising to $222,900. It is the 29th consecutive month of year-over-year price gains.
Prospective homebuyers who can't afford to make a move but are interested in more space should consider taking out a home equity line of credit with their bank or financial institution. This line of credit offered by a lender allows homeowners to put money into their property for renovation or remodeling projects, which could give them additional space to live in.
New access to homeownership
According to Steve Brown, co-owner of Irongate Realtors, a growing number of potential homebuyers should have easier access to homeownership. Brown said a new credit scoring calculation from FICO should boost the right of entry.
"NAR supports efforts to broaden access to credit for qualified homebuyers, especially those who have been shut out of the housing market or forced to pay higher interest rates because of flawed credit scores," Brown said. "A solid credit score is necessary to keep borrowing costs down."
The tale of distressed homes and all-cash sales
The number of distressed home sales was down in July compared to the same month last year, according to NAR. Sales of distressed homes, which are either foreclosures or short sales, made up nine percent of all home sales in July. That's down from 15 percent from the same month in 2013.
Yun believes the housing market is finally past the worst of the Great Recession.
"To put it in perspective, distressed sales represented an average of 36 percent of sales during all of 2009," he said. "Fast-forward to today and rising home values are helping owners recover equity and strong job creation are assisting those who may have fallen behind on their mortgage due to unemployment or underemployment."
Meanwhile, all-cash sales notched their lowest overall share in July since January 2013. All-cash sales accounted for 29 percent of transactions in July, which was a three percent decrease from June and one percent higher than the 28 percent seen in January 2013.
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