Existing home sales in the U.S. increased to a new post Great Recession high in July, amid some concerns that first-time home buyers are still very much on the sidelines.
Existing home sales increased by 2% to a seasonally adjusted figure of 5.59 million, the highest number since February 2007, according to data released by the National Association of Realtors. The number exceeded analyst expectations which were for sales of 5.48 million homes. The latest increase means that sales numbers have risen consistently for the last three months and are currently 10.3% higher than sales were a year ago.
Low interest rates and a steady increase in the number of people in new jobs have been the main drivers in pushing homes sales up. Inventories of existing homes for sale remain at low levels and the recent upswing in the building of new homes has not yet resulted in a significant increase in the number of homes for sale.
According to mortgage company Freddie Mac, average interest rates on a 30 year bond increased to 4.05% in July from 3.98% in June. Rates are expected to rise if and when the Fed increases the interest rate.
The shortage of homes on the market has meant an increase in house prices with the average price having risen by 5.6% year-on-year to stand at $234,000.
Market dynamics have given existing home owners an edge as they can tap into rising home equity as their own properties appreciate in value with rising property prices.
First time buyers are still very much in the minority accounting for only 28% of sales against the historical norm of 40% quoted by the Realtors Association.
During the period after the onset of the recession, investors were very much a feature of the housing market as they snapped up foreclosure bargains. This source of houses for sale has virtually dried up with investors accounting for 13% of July sales against a 25% peak during 2009.
The decrease in foreclosures resulting in distressed activity, down to just 7% in July, has added to the increase in the average price with statistics showing that foreclosure sales resulted in a 17% discount and short sales to a 12% discount.
Lawrence Yun, National association of Realtors chief economist said, “We have to recognize that we have a broad-based housing shortage. Home builders have been essentially out of the game or under producing [since the crash].”