September 26, 2017

Home Sales Fell 1.2% in June

The National Association of Realtors said on Monday that sales fell 1.2 percent last month from an annual rate of 5.14 million in May. The association revised down May’s sales, but they were still the highest since November 2009.

Despite last month’s dip, home sales have surged 15.2 percent from a year earlier. Sales have recovered since early last year, buoyed by job gains and low mortgage rates.

Still, mortgage rates have increased in recent weeks over concern that the Federal Reserve could slow its bond-buying programs later this year. The Fed’s bond purchases have helped keep long-term mortgage and other rates low.

Higher mortgage rates slowed sales last month of higher-priced homes in states like California and New York, the association said. The average rate nationally on a 30-year fixed mortgage jumped to 4.46 percent by the end of June from 3.81 percent at the end of May. The rate was 4.37 percent last week.

That rate increase could hamper sales in coming months, economists said. But most expect housing to continue to recover, though at a slower pace.

“There’s little doubt the housing market slowed in the summer as mortgage rates rose,” Daniel Greenhaus, chief global strategist at BTIG, an institutional brokerage firm, said in a note to clients. “Housing is still expected to grow and contribute to economic output. It just may not be at the pace we’ve seen of late.”

Sales of existing homes in June reflect contracts that were mostly signed in April and May, when mortgage rates were lower. Rising rates can cause some signed contracts to fall through if buyers no longer qualify for mortgages at higher rates.

The one factor that might be holding back sales is a limited supply of homes available. Though more sellers put their homes on the market in June, the supply remained unusually low — nearly 8 percent less than a year ago.

At the current sales pace, the number of homes for sale would be exhausted in 5.2 months. That’s below the six months’ supply that’s consistent with a healthy housing market.

Another concern is that first-time buyers, who usually drive healthy markets, are not participating as much in the current recovery. They made up only 29 percent of buyers in June, below the 40 percent that is typical. Since the housing bubble burst more than six years ago, banks have imposed tighter credit conditions and required larger down payments. That has made it harder for first-time buyers to qualify for mortgages.

The strength in housing this year has offset weaknesses elsewhere in the economy, like manufacturing and business investment. Rising home sales tend to lead to more spending at furniture and home supply stores.

Homebuilders have also stepped up construction in the last year, creating more construction jobs. In June, they applied for permits to build single-family homes at the fastest pace in five years.

Article source: http://www.nytimes.com/2013/07/23/business/economy/home-sales-fell-1-2-in-june.html?partner=rss&emc=rss

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