Home Resales at 8-Year High as Buyers Act Before Mortgage Rates Climb

Sales of existing homes in July remained at the highest pace since February 2007 (5.79 million), and have now increased year-over-year for ten consecutive months — and are 10.3 percent above a year ago, according to the latest data from the National Association of Realtors.
Healthy home resales only adds to other data pointing to a fairly strong and ongoing housing market rebound, which can help bolster the overall economic recovery.

Existing-home sales increased for the third consecutive month in July.
However there is a downside. Persistent low inventory levels and rising home prices are likely to blame for sales to first-time buyers falling to their lowest share since January, according to Realtors. The percent share of first-time buyers declined in July for the second consecutive month, falling from 30 percent in June to 28 percent — the lowest share since January of this year (also 28 percent). A year ago, first-time buyers represented 29 percent of all buyers.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.59 million in July from a downwardly revised 5.48 million in June.
“The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face,” said Lawrence Yun, NAR chief economist. “Rising rents and flat wage growth make it difficult for many to save for a downpayment, and the dearth of supply in affordable price ranges is limiting their options.”
The prospect of higher interest rates in coming months has helped fuel some urgency among prospective buyers.
Using Home Equity for Next Purchase
“The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now,” Lawrence Yun, NAR chief economist, said. “As a result, current homeowners are using their increasing housing equity towards the downpayment on their next purchase.”
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed to 4.05 percent in July from 3.98 percent in June — the first time above 4 percent since November 2014 (4.00 percent) and the highest since September 2014 (4.16 percent). Although there is disagreement among Federal Reserve watchers, the central bank’s policy makers are expected to start raising short-term interest rates as early as next month.
Properties typically stayed on the market for 42 days in July, an increase from June (34 days) but below the 48 days in July 2014. Short sales were on the market the longest at a median of 135 days in July, while foreclosures sold in 49 days and non-distressed homes took 41 days. Forty-three percent of homes sold in July were on the market for less than a month.
All-cash sales increased slightly to 23 percent of transactions in July (22 percent in June) but are down from 29 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in July, up from 12 percent in June but down from 16 percent in July 2014. Sixty-four percent of investors paid cash in July.

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