Sales of existing homes have sold at the fastest pace since February 2007 during June, increasing by 3.2% to a seasonally adjusted rate of 5.49 million units, according to data released by the National Association of Realtors (NAR).
At the same time as the increase in unit sales, the average home sale price rose by 6.5% over the past year to a record level of $236,400.
While some buyers might be rushing to lock in mortgage rates in anticipation of a rates hike, Lawrence Yun, the Realtors Association chief economist says there's also a “solid foundation” for more home sales.
Bloomberg reports that the increase in housing sales is the result of more jobs combined with historically low mortgage rates. The report however says that faster wage growth will be needed going forward to help the recovery in housing sales and it will become a bigger contributor to growth this year.
Thomas Costerg, a senior economist with Standard Chartered Bank in New York, said that sales would rise to a 5.48 million pace saying, “The housing market is on fire. The strength in housing could offset some of the weaknesses we are seeing elsewhere.”
A Bloomberg survey of 76 economists projected a gain to a 5.4 million pace in June with estimates ranging from 5.2 to 5.52 million units. Compared with June 2014, there was a 9.6% increase in the number of homes purchased.
The number of existing homes on the market rose to 2.3 million in June compared to 2.28 million in May. In addition, a home for sale would take around 5 months to sell compared to 5.1 months in May.
Lawrence Yun also said, “The market is tighter than last year. Home values are rising too fast and we need more supply to bring the price growth down, consistent with income growth.”
Commenting on the home's sales numbers, Cheng Chen, U.S. macro and rates strategist for TD Securities, said, “We expect this positive momentum is likely to be sustained in the coming months as the steady gains in employment and still favorable buying conditions continue to buoy housing activity.”
The data for new home building has also shown an increase although the demand for single homes has been almost matched by apartments, with buildings having five or more units making up 41% of new home construction in June.
Analysts believe builders are responding to a demand from buyers who are either unwilling or unable to buy the generally more expensive single family homes and who rather opt for an apartment.