Existing Home Sales Boom
In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on existing home sales, which is the number of previously constructed housing units that are sold in a month. The existing home sales figure is reported separately from the new home sales figure, which is the number of newly constructed homes that are sold in a month. An increase in existing home sales reflects improvement in the housing market while a decrease in existing home sales reflects a weakening of the housing market. In addition to reporting the number of housing units sold, the existing home sales report also includes information on the supply of units for sale as wells as the median and average existing home sales price. The existing home sales report, issued on a monthly basis, includes statistics for the prior month.
The report for July 2015 showed that existing home sales in June reached their highest level since the real estate market collapsed and the median home sale price hit an all-time high. June existing home sales increased 3.2% on a month-over-month basis to an annualized 5.49 million units (so if you take the home sales figure for June and multiply it by twelve), which exceeded industry analyst expectations. On a year-over-year basis, existing home sales have increased 9.6%, up from a 9.2% year-over-year increase in May. The increase in sales pushed up the median existing home sales price to a record $236,400 as compared to $228,700 in May. Existing home sales increased across all regions, with the Midwest leading the charge. The inventory of existing homes for sale increased moderately to 2.30 million in June from 2.29 million in May. Relatively flat inventory coupled with an increase in buyer demand caused inventory relative to sales to drop to 5.0 months of available supply, down from 5.1 months of supply in May. The only negative coming out the report is that first-time home buyers comprised 30% of sales down from 32% in May. Weak and inconsistent demand from first-time home buyers, however, did not hinder the overall performance of the housing and mortgage markets which are showing significant momentum. (Source: Bloomberg)
What it Means for Mortgage Borrowers
The June existing home sales report is the latest in a string of very positive news for the housing and mortgage markets. Buyers are finding homes to buy and successfully arranging mortgage financing. Additionally, the rise in interest rates over the past several months does not seem to be slowing down home buying activity. The one negative for prospective home buyers is that the median home sales price continues to rise while inventory continues to decline. Sustained price appreciation could eventually push prospective buyers out of the marketplace. It will be interesting to see if prospective sellers react to improved prices by bringing more inventory onto the market. If you are thinking about buying a home, use our Mortgage Selector Calculator to determine what size mortgage you can afford and the mortgage program that is right for you. With the real estate market heating up now may be the time to make your move.
The FREEandCLEAR Mortgage Expert
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