Sales of previously owned U.S. homes rebounded in September to the second-highest level since February 2007, the latest sign that the recovery in residential real estate will support growth in the world’s largest economy.
Closings on existing homes, which usually occur a month or two after a contract is signed, climbed 4.7 percent to a 5.55 million annualized rate, the National Association of Realtors said Thursday. The increase was entirely due to a jump in purchases of single-family dwellings.
Higher property values and improved job security are helping persuade more Americans to trade up and relocate, providing a source of support for the economy amid a global slowdown. Faster new-home construction that brings additional housing supply to the market is needed to lure first-time buyers and provide a further boost to the industry.
“The trend of steady improvement continues,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, who was among the closest forecasters of the housing data in a Bloomberg survey. “Consumers are feeling better and they’re becoming more willing to make that commitment, but it’s still more skewed to the upper-end of the market than we’d probably like it to be.”
The median forecast of a Bloomberg survey of economists called for 5.39 million. Estimates in the Bloomberg survey of 75 economists ranged from 5.25 million to 5.55 million. August’s rate was revised to 5.3 million from a previously reported 5.31 million.
Compared with a year earlier, purchases increased 8 percent in September on an unadjusted basis.
The median price of an existing home increased 6.1 percent to $221,900 from $209,100 in September 2014.
The number of existing properties on the market decreased
2.6 percent to 2.21 million in September, the fewest since April, from a month earlier. At the current pace, it would take
4.8 months to sell those houses compared with 5.1 months at the end of August. The inventory of unsold homes was also down from
2.28 million a year earlier.
First-time buyers represented 29 percent of September sales, which is below the typical 40 percent, according to the Realtors group.
“Homebuyers are still coming into the market but first-time buyers are not yet in,” Lawrence Yun, NAR chief economist, said in a news conference Thursday as the figures were released. “With the inventory not really increasing, we may begin to see further tight supply when the spring buying season returns next year.”
Contract closings on single-family homes priced between $100,000 and $250,000, which Yun called the “sweet spot” for the market, were up 9.2 percent from a year earlier. That compares with a 22 percent increase for properties in the $250,000 to $500,000 range.
The median time a home was on the market increased last month to 49 days from 47 days in August.
Purchases of existing homes increased in all four regions, led by an 8.6 percent jump in the Northeast. Sales rose 6.7 percent in the West, 3.8 percent in the South and 2.3 percent in the Midwest.
Sales of single-family homes rose 5.3 percent, the most in six months, while condominium purchases were unchanged.
Cash transactions accounted for about 24 percent of all purchases in September, unchanged from a year ago, according to the report. Sales of distressed property, including foreclosures, accounted for 7 percent of the total for a third month.
The Federal Reserve will be taking the health of the housing market into consideration as officials consider when to raise interest rates for the first time since 2006.
A labor market getting closer to full employment will play into that decision, as it also has for Americans pondering whether to purchase a home.
Another report Thursday showed fewer Americans than forecast filed applications for unemployment benefits last week. Jobless claims rose by 3,000 to 259,000 in the week ended Oct. 17, according to the Labor Department. The four-week average, a less-volatile measure, decreased to 263,250, the lowest since December 1973.
Companies have added 1.8 million U.S. workers to payrolls this year alone, while applications for unemployment benefits are hovering at historical lows, a good sign for job security.
Wage gains have been harder to come by, with the year-over-year growth in hourly pay stuck around 2 percent that’s characterized the expansion, now in its seventh year. That makes it harder for households to save up enough money for a down payment and foot a mortgage.
At the same time, Americans have low borrowing costs on their side. The average 30-year, fixed-rate mortgage was 3.82 percent in the week ended Oct. 15, compared to an average of
6.15 percent in the previous expansion.