Sales of previously owned homes hit highest rate since December 2006
By guest author Nicole Friedman from Wall Street Journal. Jeffrey Sparshott contributed to this article.
Sales of previously owned homes surged in July as low interest rates and a desire for more space boosted home-buyer demand.
Existing-home sales rose 24.7 % in July from June to a seasonally adjusted annual rate of 5.86 million, the highest rate since December 2006, the National Association of Realtors said Friday. The July sales marked a 8.7 % increase from a year earlier.
Economists surveyed by The Wall Street Journal expected a 14.2 % monthly increase in sales of previously-owned homes, which make up most of the housing market.
“The housing market is actually past the recovery phase and is now in a booming stage,” said Lawrence Yun, NAR’s chief economist.
Summer has replaced spring this year as the strongest buying season, as home shoppers who stayed home in March and April returned to the market as lockdowns eased. Homes typically go under contract a month or two before the contract closes, so the July figures largely reflect purchase decisions made in May or June.
A strong housing market can be a positive sign for the economy, as home purchases can lead to increased spending on furniture, appliances and renovations. Home builders have also expanded activity in response to the demand.
“People that were in condominiums are looking for townhomes, and people in townhomes are looking for single families,” said Bob Chew, a group leader at Berkshire Hathaway HomeServices PenFed Realty in Ellicott City, Md. “People are at home, and the more time they spend in the home, they realize, ‘I want some different features in my home.’ ”
But an overly rapid rise in home prices can make housing increasingly unaffordable, especially to first-time buyers. Some economists also warn that the recession and continued high unemployment could damp homebuying demand later in the year.
The median existing-home price rose 8.5 % from a year earlier to USD 304100, a record high nominally and adjusted for inflation, NAR said. Existing-home sales rose the most month-over-month in the Northeast, at 30.6 %, and in the West, at 30.5 %
In many cities, agents say the supply of homes on the market can barely keep pace with demand. There were 1.5 million homes for sale at the end of July, down 2.6 % from June and down 21.1 % from July 2019, according to NAR. At the current sales pace, there was a 3.1-month supply of homes on the market at the end of July.
New-home sales, which make up about 10 % of the market, have also roared back this summer. A measure of U.S. home-builder confidence rose in August to match the record high last reached in 1998, the National Association of Home Builders said Monday, August 17, 2020.
Housing starts, a measure of U.S. home-building, rose 22.6 % in July from June, the Commerce Department said Tuesday. Residential permits, which can be a bellwether for future home construction, rose 18.8 %.