With historically low interest rates, an improve economy and better job security, buying a home is becoming more appealing to many Americans. According to a recent press release from the National Association of Realtors, existing home sales skyrocketed this summer.
Demand for Housing Increases
Existing-home sales, which are comprised of completed transactions involving co-ops, townhomes, condominiums and single-family homes, increased 3.2 percent when compared to the previous month. The seasonally adjusted number of existing-home sales jumped to 5.49 million. This represents the highest pace since February 2007. In addition, this is the ninth consecutive month home sales increased year-over-year.
"Buyers have come back in force, leading to the strongest past two months in sales since early 2007," said Lawrence Yun, the NAR's chief economist. "This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that's giving more households the financial wherewithal and incentive to buy."
The increasing mortgage rates we saw may have contributed to a higher number of individuals deciding to invest in a new home, added Yun. Interested buyers would likely rather secure a historically low rate now instead of waiting and ultimately paying a higher interest rate later.
While all types of homes saw an increase in completed transactions, condominium and co-op sales jumped 6.6 percent from May to 650,000 units. This is also 8.3 percent higher when compared on a year-over-year basis. A higher volume of condo sales may indicate more first-time buyers are interested in these types of homes to accommodate their needs.
Different Regions See Varying Gains
The Midwest saw a 4.7 percent rise, which was 12.7 percent higher than the total seen in June 2014. The Northeast region of the country saw a 4.3 percent increase in home sales. When compared on a year-over-year basis, this is a 12.5 increase in existing-home sales for the region.
The West saw a 2.5 percent increase in sales from the previous month and an 8.8 percent rise on a year-over-year basis. The South saw the least amount of growth, however existing-home sales still increased 2.3 percent month-over-month and 7.3 percent year-over-year.
First-Time Buyers Continue to Enter the Market
As more young adults become interested in starting their own families, their need for homes becomes more substantial. The Mortgage Reports indicated low down-payment options available through government-sponsored enterprises likely contributed to more individuals feeling confident in their financial ability to afford a home.
Average Home Prices Also Rise
The demand for real estate may be the primary driver of median existing-home prices. In June, the average price for a home was $236,400. This is 6.5 percent higher when compared on a year-over-year basis.
"Limited inventory amidst strong demand continues to push home prices higher, leading to declining affordability for prospective buyers," said Yun. "Local officials in recent years have rightly authorized permits for new apartment construction, but more needs to be done for condominiums and single-family homes."