America’s housing-market recovery is in full swing.
Purchases of previously owned homes climbed 3.2 percent in June to a 5.49 million annualized rate, the strongest since February 2007, the National Association of Realtors said Wednesday. Lean inventory pushed prices to an all-time high and listed properties were snapped up in just 34 days on average, the quickest in four years of record-keeping.
A broad-based advance, marked by gains in all regions and more demand for single-family dwellings and condominiums, indicates housing will provide a spark for an economy beset by weakness in manufacturing. An improving job market and the recovery in home values are making it easier for Americans to relocate and take advantage of historically low interest rates.
“The housing market is on fire,” said Thomas Costerg, a senior economist at Standard Chartered Bank in New York, who projected sales would rise to a 5.48 million pace. “The strength in housing could offset some of the weakness we are seeing elsewhere.”
The number of existing properties on the market was little changed at 2.3 million in June compared with 2.28 million at the end of May. At the current pace, it would take 5 months to sell those houses compared with 5.1 months.
“The market is tighter compared to last year,” Lawrence Yun, NAR chief economist, said at a news conference as the figures were released. “Home values are rising too fast and we need more supply to bring the price growth down, consistent with income growth.”
To ensure that higher home prices don’t impede the market’s progress, Yun said builders need to step up construction. Recent figures indicate they’re starting to move forward. Housing starts rose 9.8 percent to a 1.17 million annualized rate, the second-highest level since November 2007, as ground-breaking on multifamily dwellings jumped 29.4 percent.
“Tight inventory conditions are being exacerbated by the fact that some homeowners are hesitant to sell because they’re not optimistic they’ll have adequate time to find an affordable property to move into,” Chris Polychron, a broker at 1st Choice Realty in Hot Springs, Arkansas, said in a statement.
Even without having signed a contract on another house, Rob and Michelle Szulczewski decided to sell their four-bedroom town-home in Odenton, Maryland, just south of Baltimore. The Szulczewskis, who close Thursday, have decided to rent an apartment as they continue to scour area listings in hopes of finding another home.
“We’ve been looking for five months and are having trouble finding something we like” in the area, Rob Szulczewski said.
Stronger sales are making homebuilders more optimistic about the industry’s prospects. The National Association of Home Builders/Wells Fargo sentiment gauge held in July at the strongest level since November 2005, as the sales outlook climbed to the highest in a decade.
The median forecast for June existing home sales in a Bloomberg survey of 76 economists called for a 5.4 million annualized rate. The Realtors’ group revised May’s rate to 5.32 million from a previously reported 5.35 million.
The median price of an existing home rose 6.5 percent from June 2014 to $236,400, exceeding the pre-recession peak for the first time.
Regionally, the gain in home sales was led by a 4.7 percent increase in the Midwest.
Investors are leaving the market and the share of first-time buyers is holding around 30 percent, which means transactions are being driven by existing homeowners looking to relocate, said Yun. A year ago, first-time purchasers represented 28 percent of all buyers.
The Realtors’ report is the latest to show housing has strengthened as of late, bolstered by a job market that’s added almost 3 million workers over the past year. At 5.3 percent, the unemployment rate is bumping up against the level that Federal Reserve policy makers consider full employment.
“The rise in existing home sales to their highest level since before the financial crisis provides further evidence that the housing recovery has shifted into a higher gear,” Andrew Hunter, an associate economist in London for Capital Economics, said in an e-mail to clients.
Fed officials are monitoring progress in the economy as they consider when to raise their benchmark interest rate for the first time since 2006. In congressional testimony last week, Chair Janet Yellen said “homebuilding has picked up somewhat lately, although the demand for housing is still being restrained by limited availability of mortgage loans to many potential homebuyers.”
That makes it harder for them to take advantage of mortgage rates that remain at historically low levels. The average rate for a 30-year fixed mortgage was 4.09 percent in the week ended July 16, according to data from Freddie Mac. While that’s the highest since October, it compares with the 6.06 percent average in the five years before the last recession began.