Pending home sales in the United States increased by 0.5% in July and are now 7.4% higher than the same month last year, according to the latest index data.
The Pending Home Sales index from the National Association of Realtors (NAR), a forward looking indicator based on contract signings, has increased year on year for 11 consecutive months and July is the third highest reading of 2015.
According to Lawrence Yun, NAR chief economist, the housing market began the second half of 2015 on a positive note, with pending sales slightly rising in July led by a solid gain in the Northeast.
‘Contract activity in most of the country held steady last month, which bodes well for existing sales to maintain their recent elevated pace to close out the summer,’ he said.
‘While demand and sales continue to be stronger than earlier this year, realtors have reported since the spring that available listings in affordable price ranges remain elusive for some buyers trying to reach the market and are likely holding back sales from being more robust,’ he explained.
Looking ahead, with inventory shortages likely to persist into, Yun expects the national median existing home price to increase 6.3% in 2015 to $221,400 and forecasts total existing home sales this year to increase 7.1% to around 5.29 million, about 25% below the prior peak set in 2005 when it was 7.08 million.
‘In light of the recent volatility in the stock market, it’s possible some prospective buyers may err on the side of caution and delay decisions, while others may view real estate as a more stable asset in the current environment,’ said Yun.
‘Overall, the prospects for ongoing strength in the housing market remain intact for now. The US economy is growing, albeit at a modest pace, and the labour market continues to add jobs,’ he pointed out, adding that uncertainty in the equity markets, even if short term rates rise in September, could stabilise long term mortgage rates and preserve affordability for buyers.
The PHSI in the Northeast increased 4% to 98.8 in July and is now 12.1% above a year ago. In the Midwest the index remained unchanged at 107.8 in July, and is now 5.7% above July 2014. Pending home sales in the South increased slightly by 0.6% to an index of 124.2 in July and are now 6.5% above last July. The index in the West declined 1.4% in July to 103, but is still 7.5$% above a year ago.
Meanwhile, new home sales increased by 26% from one year ago and Yun said that it is further proof of the housing market strengthening. ‘Amid stock market gyrations residential real estate appears a very safe place to invest particularly given the current housing shortage in America,’ he said.
The data shows that new home sales, which are not closings but rather contract signings on a newly constructed home, reached 507,000 annualised sales pace in July. Sales are up solidly from one year ago, yet only at about half the pace compared to the pre-recession levels when one million sales were the norm.
The median price of a newly constructed home was $285,900, down from $300,000 and this implies that builders are putting some focus on constructing affordable homes. The price premium above the median existing home price is now 21%, which is still wider than normal.
Many local communities are willing to authorize housing permits for multifamily apartments but less willing for condominiums or single family homes, according to the NAR, and the lack of new housing permits is partly contributing to the home ownership rate falling to a 30 year low.
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Source: Property News Spain