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Pending Home Sales Increase Almost 1% in May

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Home Sales Increase

Pending Home Sales Increase Almost 1% in May

June 30 2015, 07.50am GMT

STOCK.com

Pending home sales rose 0.9% in May over the April figure in an important return to pre- great recession figures, to be higher than the April 2006 total.

This was according to data released by the National Association of Realtors on Monday who also revealed that pending sales are currently 10.4% higher than a year ago. Pending home sales refer to signed contracts for the purchase of existing homes.

According to Lawrence Yun, chief economist for the Realtors Association, “The steady pace of job creation seen now for over a year has given the housing market a boost this spring”. He added that it is positive to see a broad based recovery and as a result, we have seen solid gains in the four major regions over the last year. As a result, new home sales are also “coming alive”.

The surge in sales of existing homes as well as new homes has implications for the white goods industry with sales of refrigerators, washing machines and other household appliances also set to rise. The home furniture industry should also see an increase in activity as buyers start to furnish their newly acquired homes.

Another factor that should provide impetus to home sales going forward was the U.S. Federal Reserve’s decision not to increase interest rates at its June meeting. A potential interest rate rise might well have discouraged some potential home buyers during May while that fear subsequently subsided after the Fed meeting.

The increase in the average contract rate for a 30-year fixed loan went from around 3.6 to over 4% from mid-April to June. A seemingly small increase such as this, combined with rising home prices, hurt the affordability of homes for many.

With home prices growing at around four times the rate that wages are increasing, affordability remains a major issue for potential home buyers. Economist Yun also said that unless there were meaningful gains in the supply of housing stocks, both existing and new, the goalpost of homeownership for many renters moves further away.

According to the U.S. census, homeownership stands at 63.7% compared to the 69% peak figure of 2004. Conversely, rental apartment occupancy is now running at an all-time high with rents rising at twice the pace of inflation. Assuming real wages increase on a par with inflation, the rapidly increasing cost of housing, both rental and sales, is placing a large segment of the population under pressure.

For the present, though, with closed sales of existing housing up by 5.1% in May month-to-month, and rent growth pushing higher with apartment occupancy at record levels, the housing industry reflects a rosy glow.

 

 

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