Low Mortgage Rates Gave Existing-Home Sales a Boost in July

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Existing-home sales increased 2.5% in July compared with June, reaching a seasonally adjusted annual rate of 5.42 million, according to the National Association of Realtors (NAR).

Year-over-year, sales were up 0.6% compared with July 2018.

Regionally, existing-home sales increased 8.3% in the West, 1.8% in the South and 1.6% in the Midwest, month-over-month, but fell 2.9% in the Northeast.

NAR includes sales of single-family homes, townhomes, condominiums and co-ops in its results.

“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” says Lawrence Yun, chief economist for NAR, in a statement.

However, the supply of affordable housing is severely low.

“The shortage of lower-priced homes have markedly pushed up home prices,” Yun says.

Home price appreciation has been much stronger in the lower-price tier compared to homes sold in the upper-price tier, based on the analysis of proprietary deed records data from Black Knight and Realtors Property Resource.

Of the same homes that were sold in 2018 that were purchased in 2012 in 13 large metro areas (repeat sales transactions), the lower half of the market had increased by more than 100% in 2018 in metro areas like Atlanta-Sandy-Springs-Roswell, Ga. (165%), Denver-Aurora-Lakewood, Colo. (103%), Miami-Fort-Lauderdale, Fla. (119%) and Tampa-St. Petersburg-Clearwater, Fla. (125%).

The median home price for homes purchased in the upper half of the market in these same metro areas in 2012 increased at a much slower pace when sold in 2018.

“Clearly, the inventory of moderately-priced homes is inadequate and more home building is needed,” Yun says. “Some new apartments could be converted into condominiums thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration (FHA) mortgages to buy condo properties.”

The median existing-home price for all housing types in July was $280,800, up 4.3% from $269,300 in July 2018.

July marked the 89th straight month of year-over-year gains.

As of the end of July, total housing inventory stood at 1.89 million, down 1.6% from 1.92 million as of July 2018.

That’s about a 4.2-month supply at the current sales pace.

“Mortgage rates are important to consumers, but so is confidence about the nation’s overall economic outlook,” Yun says. “Home buying is a serious long term decision and current low or even lower future mortgage rates may not in themselves meaningfully boost sales unless accompanied by improved consumer confidence.”

First-time buyers represented 32% of sales in July, down from 35% in June but flat compared with July 2018.

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