Home sales surge 3.2%, best since '07

In this photo taken, May 6, 2015, realtor Stephan Marshall, top, walks with potential buyer Sasha Martinez at a home for sale in Pacifica, Calif. The National Association of Realtors releases existing home sales for June on Wednesday, July 22, 2015.
In this photo taken, May 6, 2015, realtor Stephan Marshall, top, walks with potential buyer Sasha Martinez at a home for sale in Pacifica, Calif. The National Association of Realtors releases existing home sales for June on Wednesday, July 22, 2015.

WASHINGTON -- 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 keeping records.

Home sales have jumped 9.6 percent over the past 12 months, while the number of listings has risen just 0.4 percent.

The median home price has climbed 6.5 percent over the past 12 months to $236,400, the highest level -- unadjusted for inflation -- reported by the Realtors.

"The housing market is on fire," said Thomas Costerg, a senior economist at Standard Chartered Bank in New York.

Home-buying recently has surged as more buyers have flooded into the real estate market. Robust hiring over the past 21 months and an economic recovery now in its sixth year have enabled more Americans to set aside money for a down payment. But the rising demand has failed to draw more sellers into the market, limiting the availability of homes and sparking higher prices that could cap sales growth in the coming months.

"The recent pace can't be sustained, but it points clearly to upside potential," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Nationally, a mere five months' supply of homes was on the market in June, compared with 5.5 months a year ago and an average of six months in a healthy market.

Some markets are barely adding any listings. The condominium market in Massachusetts contains just 1.8 months' supply, according to a Federal Reserve report this month. The majority of real estate agents in the Atlanta Fed region -- which ranges from Alabama to Florida -- said that inventories were flat or falling over the past year.

"The market is tighter compared to last year," Lawrence Yun, the National Association of Realtors 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."

Some of the recent sales burst appears to come from the prospect of low mortgage rates beginning to rise as Fed officials consider raising a key interest rate from its near-zero level later this year. Past efforts by the Fed officials to reduce their stimulus efforts have led to higher mortgage rates, creating expectations that homebuyers will face increased borrowing costs later this year.

That possibility is prompting some buyers to finalize sales before higher rates make borrowing costs prohibitively expensive, said Daren Blomquist, a vice president at RealtyTrac, a housing analytics firm.

The premiums that the Federal Housing Administration charges borrowers to insure mortgages are also lower this year, further fueling buying activity, Blomquist said.

It's also possible that more homebuyers are aggressively checking the market for listings, enabling them to act fast with offers despite the lack of new inventory.

"Buyers can more quickly be alerted of new listings and also more conveniently access real estate data to help them pre-search a potential purchase before they even step foot in the property," said Blomquist, adding that this could help to explain why sales growth has dramatically outpaced new listings so far this year.

Properties typically sold last month in 34 days, the shortest time since the Realtors began tracking the figure in May 2011. There were fewer all-cash, individual investor and distressed home sales in the market, as more traditional buyers have returned.

Sales improved last month in all regions.

But rising home values are stretching the budgets of first-time buyers and owners looking to upgrade. As homes become less affordable, demand will likely taper off.

Home prices have increased at more than three times the pace of wages. The average hourly wage has risen just 2 percent over the past 12 months to $24.95 an hour, according to the Labor Department.

Construction has yet to satisfy rising demand, as builders are increasingly focused on the growing rental market.

Approved building permits increased 7.4 percent to an annual rate of 1.34 million in June, the highest level since July 2007, the Commerce Department said last week. Almost all the gains came for apartment complexes, while permits for houses last month rose only 0.9 percent.

The share of Americans owning homes has fallen this year to a seasonally adjusted 63.8 percent, the lowest level since 1989.

Real estate had until recently lagged behind much of the six-year rebound from the recession, hobbled by the wave of foreclosures that came after the housing bubble began to burst roughly eight years ago.

But the job market found new traction in early 2014. Employers added 3.1 million jobs last year and are on pace to add 2.5 million jobs this year. As millions more Americans have found work, their new paychecks are increasingly going to housing, both in terms of renting and owning.

Low mortgage rates also have helped, although rates are now starting to climb to levels that could slow buying activity.

The average 30-year fixed rate was 4.09 percent last week, according to mortgage giant Freddie Mac. The average has risen from a 52-week low of 3.59 percent.

Information for this article was contributed by Josh Boak of The Associated Press and by Victoria Stilwell, Michelle Jamrisko, Vince Golle and Chris Middleton of Bloomberg News.

Business on 07/23/2015

Upcoming Events